FIRST BANCORP, INC. d/b/a FIRST NATIONAL BANK RUSSELL SPRINGS Plaintiff,
UNITED STATES OF AMERICA, et al. Defendants.
THOMAS B. RUSSELL, Senior District Judge.
This matter is before the Court upon Plaintiff First Bancorp, Inc. d/b/a First National Bank Russell Springs (First National) and Defendant United States' competing Motions for Summary Judgment. (Docket Nos. 11 & 12, respectively.) The United States filed a Response, (Docket No. 15), First National filed a Combined Reply and Response, (Docket No. 18), and the United States filed a Reply, (Docket No. 19). This matter is now fully briefed and ripe for adjudication.
This case concerns approximately $200, 000 that the Internal Revenue Service (IRS) levied from Tantus Tobacco, LLC. Brian Cooper purchased Tantus Tobacco, along with some real property and interests in several other businesses, from Kenneth Catron in 2008. Cooper agreed to pay Catron in 36 monthly payments of $18, 404.34, plus interest. These payments are referred to in this litigation as the "Cooper Payments."
First National loaned substantial sums of money to Catron for the purpose of developing and launching a new business. First National secured the funds it loaned Catron by entering into several security agreements with Catron. The first of these security agreements was entered into on June 29, 2007 (the "2007 Security Agreement"). That agreement secured "[a]ll present and future debts, even if this Agreement is not referenced, the debts are also secured by other collateral, or the future debt is unrelated to or of a difference type than the current debt." (Docket No. 11-3.) The 2007 Security Agreement went on:
SECURITY INTEREST. To secure the payment and performance of the Secured Debts, Debtor gives Secured Party a security interest in all of the Property described in this agreement that Debtor owns or has sufficient rights in which to transfer an interest, now or in the future, wherever the property is or will be located, and all proceeds and products of the Property....
PROPERTY DESCRIPTION. The Property is described as follows:
§ Accounts and Other Rights to Payment: All rights to payment, whether or not earned by performance, including, but not limited to, payment for property or services sold, leased, rented, licensed, or assigned....
§ Specific Property Description: The Property includes, but is not limited by, the following...: ALL EQUIPMENT, ACCOUNTS RECEIVABLE AND INVENTORY
(Docket No. 11-3.) First National filed a financing statement, also on June 29, 2007, with the Kentucky Secretary of State (the "2007 Financing Statement"). That financing statement described the collateral as "ALL EQUIPMENT, ACCOUNTS RECIEVABLE [sic] and INVENTORY." (Docket No. 11-4, at 2.)
On November 19, 2007, a federal tax lien arose as to Catron in the amount of $69, 346.94 for the 2006 tax year (the "2006 Tax Lien"). The IRS filed a notice of federal tax lien in regard to the 2006 Tax Lien on April 14, 2008, in the Russell County Clerk's Office.
On November 7, 2008, Catron entered into an agreement with Cooper and several other entities (the "Cooper Parties"), agreeing to sell the Cooper Parties all of Catron's interest in the Cooper Parties and the businesses they operated. That agreement obligated Cooper to pay Catron the principal amount of $662, 556.27, plus interest on the unpaid balance, payable in 36 monthly payments of $18, 404.34, plus interests. As noted above, these payments are referred to as the "Cooper Payments."
On March 19, 2009, Catron entered into another security agreement with First National (the "March 2009 Security Agreement"). Much like the 2007 Security Agreement, the March 2009 Security Agreement took a secured interest in Catron's "Accounts and Other Rights to Payment, " "Inventory, " and "Equipment." (Docket No. 11-7.) The March 2009 Security Agreement differed from the 2007 Security Agreement insofar as the "Specific Property Description" section stated: "ALL INVENTORY, RAW MATERIALS, WORK IN PROGRESS OR MATERIALS USED OR CONSUMED IN DEBTOR'S BUSINESS, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, TOGETHER WITH ALL PROCEEDS INCLUDING ACCOUNTS RECEIVABLE AND NOTES...." (Docket No. 11-7.) First National filed a financing statement on March 24, 2009 (the "March 2009 Financing Statement"), which tracked the "Specific Property Description" language of the March 2009 Security Agreement in describing the collateral. ( See Docket No. 11-8, at 2.)
On September 14, 2009, a federal tax lien arose as to Catron in the amount of $264, 805.91 for the 2007 tax year (the "2007 Tax Lien"). The IRS filed a notice of federal tax lien in regard to the 2007 Tax Lien on October 16, 2009, in the Russell County Clerk's Office.
On November 20, 2009, Catron and First National entered into an "Assignment of Proceeds from Agreement and Release, " whereby Catron assigned to First National his interest in the Cooper Payments. ( See Docket No. 11-10.) Then on November 27, 2009, Catron entered into another security agreement with First National (the "December 2009 Security Agreement"). ( See Docket No. 11-11.) That agreement took a secured interest in Catron's property as follows: "Accounts and Other Rights to Payment, " "Instruments and Chattel Paper, " and "General Intangibles, " and set forth the "Specific Property Description" as "ASSIGNMENT OF PROCEEDS FROM AGREEMENT AND RELEASE DATED 11-20-2009." (Docket No. 11-11.) First National filed a financing statement on December 11, 2009, which tracked the "Specific Property Description" language of the December 2009 Security Agreement in describing the collateral. (Docket No. 11-12, at 2.)
Beginning in October 2010, the IRS levied a total of nine Cooper Payments, the first eight in the amount of $22, 222.22 each and the ninth and final payment in the amount of $14, 173.10, for a total amount of $191, 950.86. The first four levies, which occurred on October 8, November 19, and December 13, 2010, and January 12, 2011, initially were applied to the 2006 Tax Lien. However, Catron filed an amended return on August 20, 2009, and the processing of that return resulted in an abatement of Catron's 2006 federal tax liabilities. As such, the IRS applied four credits in the amount of the first four levies to Catron's still-outstanding liability under the 2007 Tax Lien. The final five levies of the Cooper Payments, which occurred on February 14, March 14, April 11, May 11, and June 10, 2011, ...