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Wells Fargo Bank, N.A. v. Lam

Court of Appeals of Oklahoma, Division IV

December 7, 2018

WELLS FARGO BANK, N.A., Plaintiff,
v.
PHONG LAM, Defendant/Appellee, and THANT T. PHAM; TINKER FEDERAL CREDIT UNION; HSBC BANK NEVADA, N.A.; CAPITAL ONE, N.A.; CAPITAL ONE BANK, (USA), N.A.; OCCUPANT 1 (Real Name Unknown); OCCUPANT 2 (Real Name Unknown), Defendants, and STATE OF OKLAHOMA ex rel. OKLAHOMA TAX COMMISSION, Defendant/Appellant.

          Mandate Issued: 02/13/2019

          APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA HONORABLE ALETIA HAYNES TIMMONS, TRIAL JUDGE

          Rex D. Brooks, Oklahoma City, Oklahoma, for Defendant/Appellee

          Lee Pugh, GENERAL COUNSEL, Marjorie Welch, FIRST DEPUTY GENERAL COUNSEL, Mary Ann Roberts, ASSISTANT GENERAL COUNSEL, OKLAHOMA TAX COMMISSION, Oklahoma City, Oklahoma, for Defendant/Appellant

          DEBORAH B. BARNES, PRESIDING JUDGE

         ¶1 Defendant/Appellant State of Oklahoma ex rel. Oklahoma Tax Commission (the OTC) appeals from an order of the district court granting the motion of Defendant/Appellee Phong Lam (Lam) for sanctions against the OTC and awarding Lam's counsel "$2500.00 in attorneys fees and costs for the expenses and time expended in" seeking removal of a purported tax lien on Lam's property. We affirm.

         BACKGROUND

         ¶2 On February 9, 2016, Plaintiff Wells Fargo Bank, N.A. filed a foreclosure petition in which it alleged Lam was in default on a purchase promissory note he executed on May 1, 2012, and alleged it was entitled to foreclose the mortgage securing payment of that note on certain real estate located in the Rock Knoll addition in Oklahoma County, Oklahoma (the subject property). Wells Fargo also alleged various entities, including the OTC, were made defendants in the foreclosure action because they may be claiming some interest in the subject property. Wells Fargo alleged: "[T]here appears of record in the office of the County Clerk of OKLAHOMA County, Oklahoma, a Tax Warrant No. ITI2011160629-00, entitled State of Oklahoma ex rel., Oklahoma Tax Commission vs. Phong Lam, in the amount of $60, 196.88, filed May 20, 2011, in Book 11637, Page 22." It alleged that the OTC along with other named defendants "may be claiming some right, title, lien, estate, encumbrance, claim, assessment or interest in or to [the subject property]" that is adverse to and constitutes a cloud on Wells Fargo's title but that any such lien or interests are "subsequent, junior and inferior to the first mortgage lien" held by Wells Fargo.

         ¶3 The OTC filed its answer on March 14, 2016, in which it "admit[ted] an interest in the property pursuant to 68 O.S. § 231 and § 234, in the amount shown in the attached exhibit(s), together with interest and penalty according to law." The answer states, "[The OTC] prays that its tax warrants and or certificates of indebtedness be declared liens on the [subject] property described in [Wells Fargo's] Petition, and that its liens be prioritized and satisfied from the sale proceeds." The OTC requested the relief described in its answer.

         ¶4 Attached to the answer was a Tax Warrant numbered ITI2011160629-00, filed May 20, 2011, in Book #11637, Page #22, in Oklahoma County. The name of the taxpayer on the warrant was Phong Lam, and stated his address at Whispering Oak Road in Oklahoma City and his tax identification number as XXXXX0722S. The warrant stated the amount due at that time including penalty and interest was $60, 196.88, and directed that it be filed in the same manner as a judgment.

         ¶5 Lam also filed an answer in March 2016, specifically denying, among other things, the allegations that the OTC and other named defendants had an interest in the subject property.

         ¶6 On March 18, 2016, Lam's attorney notified the OTC that the Phong Lam named in its tax warrant is not Lam, provided the OTC with Lam's full social security number, stated Lam "has been mistaken for the Phong Lam who has tax warrants on other occasions," and stated Lam has been successful in showing he is not the same Phong Lam listed on the tax warrants. Lam asked the OTC to "please withdraw [its] answer filed in [the foreclosure action] in which [it] claim[s] an interest in the real property which is the subject of the above referenced foreclosure action." The record shows no response by the OTC to Lam's request.

         ¶7 Four months later, on July 26, 2016, Lam's attorney sent the OTC another letter in which he enclosed a motion for sanctions against the OTC pursuant to 12 O.S.Supp. 2014 § 2011 (B)(2)(3) & (C). Lam's attorney informed the OTC he would not file the motion for twenty-one days "to give [the OTC] a chance to dismiss [its] claim for a Tax Warrant Lien on [the subject property] in [the foreclosure action] on the basis of Tax Warrant # ITI2011160629-00 against a Phong Lam with the last four digits social security number of 0722," which are not the last four digits of Lam's social security number as previously provided to the OTC in the March 2016 correspondence.

         ¶8 An email dated July 29, 2016, from the attorney for the OTC to the attorney for Wells Fargo and which was copied to Lam's attorney stated, as follows:

I have attached correspondence from [Lam's attorney] which I received in regard to the [foreclosure] case. I wanted to make you aware of [Lam's attorney's] dispute as to whether you have named the OTC as a defendant in error. His letter is somewhat barking up the wrong tree as the OTC has no way of knowing who the mortgagee is or if the Phong Lam against whom the OTC has a lien is the same person as the mortgagee at issue. The OTC was named in this suit as a defendant with a tax warrant listed as required by 68 O.S. § 234. If the OTC has been improperly named, we would appreciate being dismissed from the suit.

         The OTC did not, however, withdraw its answer.

         ¶9 On February 27, 2017, Lam filed a motion for sanctions against the OTC pursuant to 12 O.S. § 2011 (B)(2)(3) & (C) and § 2011.1 "for filing a frivolous pleading by claiming frivolously that it has a Tax Warrant Lien against [Lam's] property." He asked that he be awarded attorney fees in the amount of $2, 500 as a sanction against the OTC. On March 1, 2017, the OTC filed a "Withdrawal of Answer and Issuance of Disclaimer State of Oklahoma, ex rel. Oklahoma Tax Commission" in which it "disclaims its lien no. ITI2011160629-00 as it relates to the specific real estate involved in this action." It requested that it be "discharged with its costs."

         ¶10 A hearing on Lam's motion was held May 18, 2017. [1] In subsequent briefing ordered by the court, the OTC argued, among other matters, that its answer was not filed in violation of § 2011(B)(2) & (3) because the "OTC liens are issued in the form of a tax warrant against an individual taxpayer in the county of the last known address of the taxpayer," pursuant to 68 O.S. 2011 §§ 230 & 231. The "liens do not contain a legal description or address of a specific property, but attach to any property owned by the named taxpayer in that county." Because Lam's name is the same as the name on the tax warrant, the OTC argued that at the time it filed its answer, it "had no reason to believe that tax warrant ITI2011160629-00 was included incorrectly in the foreclosure." It argued its legal basis for filing an answer in the foreclosure proceeding is found in 68 O.S. 2011 §§ 231 & 234, [2] and there was evidentiary support for its answer because the main defendant in the foreclosure proceeding had the same name as the name on the tax warrant.

         ¶11 The OTC also argued that its action in filing its answer was not unreasonable because Wells Fargo asserted in its petition that the OTC may have an interest in the subject property and Wells Fargo had access to all relevant information including Lam's social security number and "chose to name the OTC" as a defendant. It argued, "The Answer of the OTC was filed in part based on the Petition of the Plaintiff, which was filed with this Court and which Defendant Phong Lam has not alleged to have been filed frivolously." This reliance on Wells Fargo's allegations and the OTC's limited resources, the OTC argued, show its actions were not in bad faith or without reason and, therefore, it should not be sanctioned.

         ¶12 In its order, the trial court found that after the OTC filed its answer, it was notified that the tax warrant "was on the wrong property and against the wrong person." Several months after that notice was given, the OTC was again asked to remove the lien from Lam's property and was given the statutory twenty-one days to remove the lien before sanctions would be filed. The trial court further found that two days after the sanctions motion was filed, the OTC "filed a disclaimer of the lien, but only removed it with relation to the [subject property], almost a year from the ...


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