Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-01330/USCOURTS-ca10-94-01330-0/pdf.json

Parties Involved:
Betty J. Gibbons
Appellant
David Gibbons
Not Party
United States of America
Appellee

Document Text:

PUBLISH /FILED . UNITED STATES COURT OF APPEALslJ'nited States Co~t ~1 ApiJC~..J Tenth Ctrcmt 

TENTH CIRCUIT DEC 01 1995 

PATRICK FISh"""ER 

Cleric 

UNITED STATES OF AMERICA, ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) No. 94-1330 

) 

DAVID GIBBONS, ) 

and 

BETTY J. 

) 

Defendant, ) 

) 

) 

) 

GIBBONS, ) 

) 

Defendant-Appellant. ) 

Appeal from the United S.tates District Court 

for the District of Colorado 

(D.C. No. 92-S~1205) 

Fred M. Hamel, Denver, Colorado, for Defendant-Appellant Betty J. 

Gibbons. 

Robert W. Metzler, Attorney, Tax Division (Loretta C. Argrett, 

Assistant Attorney General, and WilliamS. Estabrook, Attorney, 

Tax Division; Of Counsel: Henry Lawrence Solano, United States 

Attorney, with him on the brief), Department of Justice, Washington, D.C., for Plaintiff-Appellee. 

Before HENRY and LOGAN, Circuit Judges, and ELLISON, District 

Judge.* 

LOGAN, Circuit Judge. 

* The Honorable James 0. Ellison, Senior United States District 

Judge, United States District Court for the Northern District of 

Oklahoma, sitting by designation. 

Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 1 
This case involves a dispute between the United States 

Internal Revenue Service (IRS) and Betty J. Gibbons, the ex-wife 

of taxpayer David Gibbons. The IRS brought suit pursuant to 

I.R.C. §§ 7401-7403, to reduce to judgment federal tax assessments 

against David Gibbons and to foreclose federal tax liens against 

real property in which he held an interest. The district court 

found that despite a dissolution of marriage decree awarding Betty 

Gibbons the conditional right to live on the property during her 

life, David and Betty continued to own the property as joint tenants. Thus, it held she was entitled to only one-half of the 

proceeds of the foreclosure sale. Betty Gibbons appeals. 

I 

In 1970, Betty and David Gibbons acquired title to real 

property in Denver, Colorado (Ogden Street property) "in joint 

tenancy." Appellant's App. 10, 40. They were divorced in January 

1982. The dissolution decree incorporated a separation agreement 

that provided in relevant part 

House at 325 So. Ogden held in Joint Tenancy to be 

occupied by Betty J. Gibbons and three minor children, 

and mortgage paid monthly by Betty J. Gibbons. If Betty 

J. Gibbons remarries and/or moves from said house, house 

is to be sold and equity divided equally between David 

J. Gibbons and Betty J. Gibbons. 

Id. at 43. 

Between 1984 and 1990 the IRS filed notices of federal tax 

liens1 against David for nonpayment of taxes. In June 1992 the 

IRS filed this suit seeking to reduce to judgment federal tax 

1 Notices were recorded in 1984, 1988, and 1990. The total 

amount of the liens which attached to David Gibbons' interest in 

the Ogden Street property was $42,066.28. 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 2 
assessments against David and to foreclose the tax liens against 

the Ogden Street property. Betty evidently neither contested the 

IRS' right to seek sale of the entire property nor asked the district court to exercise its discretion to decline to order a 

foreclosure sale.2 She argued, however, that the separation 

agreement conveyed to her a life estate interest in the property 

for which she was entitled to be compensated. The district court 

rejected Betty's position; it determined that David and Betty continued to hold the Ogden Street property in joint tenancy and that 

Betty was entitled to only one-half of the proceeds of the forced 

sale. 

The threshold question before us is whether, under Colorado 

law, the separation agreement severed the joint tenancy and conveyed to Betty a new interest in the Ogden Street property. If we 

find that it did then we must address whether (based on Colorado 

recording statutes) her failure to record her interest where deeds 

are registered rendered it invalid as against the recorded tax 

liens. Finally, if we find that Betty's interest was valid 

against the IRS liens, we must determine whether a stipulation of 

the parties is determinative of the value of her additional 

interest. We review de novo the district court's interpretation 

2 In December 1992 Betty Gibbons filed a counterclaim against the 

IRS. In March 1994 the district court entered a judgment dismissing the counterclaim. Betty Gibbons did not appeal dismissal 

of the counterclaim. The IRS obtained a default judgment against 

David Gibbons, who did not appear at trial and has not appealed 

from the district court's judgment against him. 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 3 
of both federal and Colorado law. See Salve Regina College v. 

Russell, 499 U.S. 225, 231 (1991). 

II 

The district court based its determination that the separation agreement did not create a new interest in the property in 

part upon cases addressing the requirement for delivery of a deed 

to convey property. These cases, however, addressed whether or 

not there was actual delivery and acceptance of a deed sufficient 

to pass title. See, ~, Sims v. Sperry, 835 P.2d 565, 568 

(Colo. App. 1992) (when grantor did not intend to unconditionally 

and presently part with "possession and control or any power over 

the deed, for the benefit of grantee," delivery of deed did not 

pass title, even if deed was recorded) ; Stagecoach Property Owners 

Ass'n v. Young's Ranch, 658 P.2d 1378, 1380-81 (Colo. App. 1982) 

(differentiating between conveyance and dedication for purposes of 

statute providing for conveyance of park area by subdividers) . 

Property may be passed in many ways other than by deed, including 

court orders in probate of a decedent's estate and in final termination of marriages such as the one before us. See, ~, Baker 

v. Baker, 667 P.2d 767, 769 (Colo. App. 1983) (separation agreement, made part of divorce decree, granted wife life tenancy or 

leasehold estate) . Rule 70 of the Colorado Rules of Civil Procedure provides that "the court . may enter a judgment divesting 

the title of any party and vesting it in others and such judgment 

has the effect of a conveyance executed in due form of law." 

Betty Gibbons asserts that the separation agreement conveyed 

to her a life estate interest and destroyed the joint tenancy in 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 4 
the Ogden Street property. Colorado has adopted the modern test 

for determining whether a joint tenancy has been destroyed. That 

test "focuses on the intent of the parties with regard to the 

right of survivorship characteristic." Mangus v. Miller, 532 P.2d 

368, 369 (Colo. App. 1974). Two Colorado cases are instructive on 

this point. 

In Bradley v. Mann, 525 P.2d 492 (Colo. App. 1974), aff'd, 

535 P.2d 213 (Colo. 1975) (en bane), a separation agreement provided that a residence would "remain in the joint names of the 

parties and the party residing therein shall pay all current 

expenses." Id. at 493. The agreement further provided that the 

property would be sold upon the remarriage of the wife, the 

youngest child reaching age twenty-one, or by mutual agreement, 

whichever came first, with the proceeds to be divided equally 

between the parties. The Colorado Court of Appeals, while 

acknowledging that obtaining a divorce by itself is not an indication of intent to terminate joint tenancy ownership, nevertheless held the joint tenancy no longer existed. It stated that the 

provision for ultimate sale of the property and division of the 

proceeds indicated that "neither party had the ultimate expectation of receiving the other's interest in the property upon that 

party's death, and the ownership of the property was thereby converted to a tenancy in common." Id. at 494. 

In Mangus v. Miller, the Colorado Court of Appeals addressed 

whether a separation agreement that provided for a five-year lease 

to one of the parties and an option to purchase a half interest in 

the premises terminated a joint tenancy. The court stated that 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 5 
because each party had voluntarily surrendered some of their 

rights, they had terminated the joint tenancy. The court held 

that "[t]he right of either party to insist upon a sale to one or 

the other is wholly inconsistent with the continuance of a joint 

tenancy relationship." 532 P.2d at 369-70 (citation omitted). 

The court reasoned that the provisions of the separation agreement 

were inconsistent with the intent that a surviving ex-spouse 

should succeed to the deceased spouse's interest. 

In the instant case the agreement provided that the Ogden 

Street property would be sold if Betty Gibbons either remarries or 

moves out of the home; thus Betty had the unconditional right to 

force the sale of the property. Under Mangus, this right is 

inconsistent with an intent to continue a joint tenancy. The IRS 

counters that the phrase "held in Joint Tenancy" in the separation 

agreement indicates that there was no intent to destroy the joint 

tenancy. But in Bradley the court stated that "[e]ven if the 

agreement had used the words 'joint tenancy,' we would still be 

required to examine the remainder of the agreement to see whether 

it provided for a disposition which would be inconsistent with the 

right of survivorship." 525 P.2d at 494 n.l.3 Under Colorado 

law, the separation agreement severed the joint tenancy. 

3 Further, as Betty Gibbons pointed out in her brief, the separation agreement stated that the property was held in joint 

tenancy--past tense--and the rest of the clause used the future 

tense, i.e., "to be occupied" by Betty Gibbons and "is to be 

sold," thus indicating that the use of "joint tenancy" may have 

been a reference to the past ownership interest. 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 6 
The remaining question is to identify what interest the separation agreement conveyed to Betty Gibbons. We think the Colorado law cited above indicates that she has a possessory interest 

in the whole of the property and a remainder interest in one-half. 

We are satisfied that the possessory interest is a form of life 

estate--because it is capable of lasting throughout Betty's lifetime and it is not terminable at any fixed or computable period of 

time or at the will of ex-husband David. See Restatement of 

Property § 18(b) (1936); see also Collins v. Shanahan, 523 P.2d 

999, 1003 (Colo. App. 1974), rev'd in part on other grounds, 539 

P.2d 1261 (Colo. 1975) (en bane) ("It has been said that a life 

estate exists if the interest can or may continue during a 

life."). Betty's interest is qualified by the conditions that she 

live in the home, pay on the mortgage, and that she not remarry. 

But these are all conditions within her power to control; her 

interest does not expire automatically at a fixed date nor is it 

subject to the will of her ex-husband. See Baker v. Baker, 667 

P.2d 767,- 769 (Colo. App. 1983) (separation agreement providing 

that husband would make premises available to wife if she elected 

to continue in possession and paid $150 per month in rent 

described by court as both a life tenancy and a leasehold estate) . 

At common law this estate would be characterized as a life estate 

determinable. See Restatement of Property § 23, illus. 1. 

Whether Betty's interest is characterized a life estate determinable, a defeasible lifetime lease, or something akin to a home-

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 7 
stead interest, she has more than a one-half interest in the 

property. 

III 

The IRS argues that even if the separation agreement conveyed 

to Betty Gibbons an additional interest in the Ogden Street property, her failure to record the separation agreement or dissolution decree renders that conveyance invalid as against the IRS 

lien.4 The IRS lien was created under I.R.C. § 6321, which provides: 11 If any person liable to pay any tax neglects or refuses 

to pay the same after demand, the amount (including any interest, 

additional amount, addition to tax, or assessable penalty, 

together with any costs that may accrue in addition thereto) shall 

be a lien in favor of the United States upon all property and 

rights to property, whether real or personal, belonging to such 

person. 11 Under § 6321, the taxpayers' 11 rights to property11 are 

determined under state law. See Aquilino v. United States, 363 

U.S. 509, 512-14 (1960); Gardner v. United States, 34 F.3d 985, 

987 (lOth Cir. 1994) (in determining whether a federal tax lien 

attaches we look to state law to determine the nature of the legal 

interest which the taxpayer had in the property) . 

The IRS asserts that under Colorado law it is within a 11 class 

of persons with any kind of rights who first records, 11 and thus 

4 Apparently neither the separation agreement nor the divorce 

decree were recorded in the office of the county clerk. We note 

that the copies in the appendix do contain file stamps that they 

were recorded in some office in the City and County of Denver. 

See Appellant's App. 41, 43. For purposes of this opinion we 

presume, as the district court and the parties do, that whatever 

recording was done here it was not sufficient to place the documents in the chain of title to the real estate. 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 8 
its lien prevails over Betty's unrecorded ownership interest. See 

Colo. Rev. Stat. § 38-35-109.5 The IRS relies on the Fifth Circuit cases of United States v. Creamer Indus .. Inc., 349 F.2d 625 

(5th Cir.), cert. denied, 382 U.S. 957 (1965), and Prewitt v. 

United States, 792 F.2d 1353 (5th Cir. 1986). The Creamer court 

determined that the United States was a 11 creditor 11 protected under 

the Texas Recording Act and held that § 6321 tax liens attached to 

properties that the taxpayers previously had conveyed by unrecorded instruments. Creamer, 349 F.2d at 628. In Prewitt the 

Fifth Circuit allowed a § 6321 lien to defeat the interest of the 

plaintiff who had purchased the property from the former wife of 

the taxpayer because the divorce decree was unrecorded. See 

Prewitt, 792 F.2d at 1356-57. 

The First and Eighth Circuits have rejected the Fifth Circuit 

view. United States v. V & E Engineering & Constr. Co., 819 F.2d 

331 (1st Cir. 1987), held that a § 6321 lien did not attach to 

property that the taxpayer previously had conveyed by an unrecorded deed because once the taxpayer sold his property he did not 

have a 11 right 11 to that property within the meaning of § 6321. Id. 

5 Colorado Revised Statutes § 38-35-109 provides that: 

All deeds, powers of attorney, agreements, or other 

instruments in writing conveying, encumbering, or 

affecting the title to real property, certificates, and 

certified copies of orders, judgments, and decrees of 

courts of record may be recorded in the office of the 

county clerk and recorder of the county where such real 

property is situated. No such unrecorded instrument or 

document shall be valid as against any class of persons 

with any kind of rights who first records. except 

between the parties thereto and such as have notice 

thereof. This is a race-notice recording statute. 

(Emphasis added.) 

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at 333. Likewise, very recently, the Thomson v. United States, 66 

F. 3d 160, 163 (8th Cir. 1995), court determined that under the 

Minnesota recording statute, which protects subsequent bona fide 

purchasers and judgment creditors against unrecorded conveyances, 

the IRS lien did not defeat the ex-wife's interest even though she 

had not recorded her interest. 

The Eighth and First Circuits rely upon the Supreme Court's 

plain language approach to § 6321: 11 The federal statute relates 

to the taxpayer's rights to property and not to his creditors' 

rights. 11 United States v. National Bank of Commerce, 472 U.S. 

713, 727 (1985). In other words, the tax collector steps into the 

taxpayer's shoes. See Gardner·v. United States, 34 F.3d 985, 988 

(lOth Cir. 1994); see also United States v. Rodgers, 461 U.S. 677, 

690-91 (1983) ( 11 the Government's lien under§ 6321 cannot extend 

beyond the property interests held by the delinquent taxpayer 11 ). 

Although the Colorado statute provides that an unrecorded 

conveyance is void 11 as against any class of persons with any kind 

of rights who first records,n it also continues-- 11 except.between 

the parties thereto and such as have notice thereof. 11 Colo. Rev. 

Stat. § 38-35-109 (emphasis added). The separation agreement, 

although unrecorded, prevents David from contesting Betty's ownership of what was conveyed to her.6 The IRS must stand in the 

shoes of David Gibbons, who has no 11 rights to property, 11 I.R.C. 

6 As the Thomson court pointed out, if a recording statute 

provides that a conveyance has no effect in passing title until 

recorded, see, ~, United States v. Hole, No. 75-1770-MA, 1980 

WL 1555 (D. Mass. Mar. 31, 1980), the transferor (in this case 

David Gibbons) could be construed to retain an interest to which a 

§ 6321 lien could attach. Thomson, 66 F.3d at 163. 

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Appellate Case: 94-1330 Document: 01019280226 Date Filed: 12/01/1995 Page: 10 
§ 6321, to which the tax lien could attach in the property interest conveyed to Betty Gibbons. Therefore, the IRS lien against 

property "belonging to" David does not reach Betty's interest. 

The IRS stipulated that its tax levy does not reach any interest 

of Betty Gibbons. 

IV 

Although the IRS can force the sale of the property against 

Betty Gibbons' interest, see Rodgers, 461 U.S. at 694-96, the IRS 

must reimburse her for her fifty percent remainder interest plus 

the value of her possessory interest that will be ousted by the 

sale.7 Betty asserts that the value is controlled by the stipulation of facts between the parties. The stipulation on which she 

relies provides: 

If the Court determines that Ms. Gibbons has a life 

estate in the real property in addition to and apart 

from her 50% ownership interest with Mr. Gibbons, Ms. 

Gibbons' Exhibit D is the applicable actuarial table for 

use in valuing the life estate. Pursuant to Exhibit D 

the value of a life estate for Ms. Gibbons is 82.621%, 

with the Gibbons each having one-half of the 17.379% 

remainder, for a total interest for Ms. Gibbons of 

91.311% and for Mr. Gibbons of 8.680%. 

Appellant's App. 12. 

We have determined that Betty does not have an unqualified 

"life estate"; rather, she has what we characterize as a life 

estate determinable on the condition that she occupy the horne, not 

remarry, and pay the mortgage payments as due. Thus we do not 

7 Because the IRS has the right under Rodgers to force a sale of 

the property against Betty Gibbons' interest her acquiescence to 

the sale does not mean that she has moved off the property in the 

sense required to trigger the fifty-fifty allocation between the 

parties specified in the separation agreement. 

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construe the stipulation as controlling because she does not have 

an unfettered life estate as contemplated by the stipulation. 

We must remand to the district court for further proceedings 

to evaluate the value of Betty Gibbons' property interest. The 

parties stipulated that Betty was forty-nine years old and had no 

intention of either remarrying or moving from the property. Thus, 

the remarriage and occupancy requirements would not diminish the 

value of her interest from that stipulated for a 11 life estate. 11 

The requirement of mortgage payments, however, placed entirely on 

her, could diminish the value of her interest unless that mortgage 

has been paid off. If there is an outstanding mortgage, the valuation problems on remand will be similar to valuing a condemnation action in which a tenant with a long-term favorable lease 

must be compensated. 

REVERSED AND REMANDED for further proceedings in accordance 

with this opinion. 

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