2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 5-17-2005 

# P opky v . U SA P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 04-2798

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2005

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2005 D e c i sion s b y an authori z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " P op k y v . U SA" (2005). 2005 D e cisio n s . P ape r 1173. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2005/1173NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

____________ N o. 04- 2798

____________ HOWARD D. P OP KY; S HE I L A A. P OP KY, A p p e llan ts v. UNI TE D ST ATE S OF AM ERI CA

____________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia ( D . C . N o. 03- cv- 01487) D istri ct Ju d g e: H o n o rab le T h o m as N . O ’N eil l, Jr.

____________ Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

M ay12, 2005 B e f o re : S L O V IT E R , F IS H E R a n d A L D IS E R T , C i r cui tJudges .

( Fi l ed: M ay17, 2005)

____________ OPI NI ON O F THE COURT

____________ F IS H E R , C i r cui tJudge . A ppel l ant s H ow ar d and Shei l a Popky , hus band and w i fe, appea l fr om the D i s t r i ct C o u rt’s g ra n t o f

su m m a ryju d g m e n t in th e g o v e rn m e n t’s f a v o r in c o n n e c tio n w ith th e ir2

a tte m p t to re c o v e r m o n ie s o b ta in e d b yth e g o v e rn m e n t in s a tis f a c tio n o f a ta x lie n . A p p e llan ts c o n ten d th a t th e f e d e ra l tax lien c o u ld n o t atta c h to S h e ila P o p k y ’s in ter e st in p ro p e rtyo w n e d b yh e r a n d h e r h u sb a n d a s te n a n ts b yth e e n tiretie s. W e d isa g re e a n d w ill th e re f o re a f f irm th e ju d g m e n t o f

th e D istric t C o u rt. A s w e w ri t e sol el yfor the p art i es, and the fa ct s ar e kn ow n to them , w e w i l l dis cuss onl ythos e fa ct s pert i nentt o t hi s appea l . Shei l a Popkyhad fa i l ed t o payempl oym entt axes th a t w e re re q u ir e d to b e w ith h e ld f ro m th e w a g e s o f

th e e m p lo y e e s o f

S h e ila ’s E M S , In c ., a bus i nes s w hi ch s he ow ned. T he I nt ernal R evenue Ser vi ce ( “I R S”) as s es s ed t axes of $42, 799. 20 agai ns tShei l a Popkyattr i but abl e t o thes e unpai d t axes , and i n Sept ember 2002, fi l ed a not i ce of

t ax l i en aga i ns theri n M ont gom eryC ounty , Penns y l vani a, fort he s ame am ountpl us acc rual s . Shor t l yaft erthe fi l i ng of the l i en not i ce, M r . and M r s . Popky s ol d r eal pr opertyl ocat ed i n N arbeth, Penns y l vani a, w hi ch theyow ned as t enant s byt he ent i r et i es . T he t i t l e i ns ur ance companyhel d $48, 000 of the s al e pr ocee ds i n es cr ow due t o the out s t andi ng fede r al t ax l i en, and eve ntual l yi s s ued a c heck t o the governm entfor $43, 324. 43 t o s at i s fythe l i en. T he Popky s i ni t i at ed thi s qui ett i t l e ac t i on t o r ecove rthe p ro c e e d s p a id to th e IR S , an d th e g o v e rn m e n t co u n ter c laim e d se e k in g u n p a id em p loym en t t ax es a n d u n p aid in co m e tax es. T h e D istri ct C o u rtg ran ted s u m m ary j udgm entt o t he governm entand ent er ed an or deraw ar di ng the governm ent$43, 324. 43 o n th e P o p k y s ’ c l a i m a n d $ 1 5 , 8 1 4 . 4 7 o n th e g o v e rn me n t ’ s c o u n t e r c l a i m.3

T h e D i s tr i c tC o u r th a d j u r i s d i c t i o n u n d e r2 8 U . S . C . § § 1 3 3 1 , 1 3 4 0 a n d 1 3 4 5 . We h av e jurisdicti o n u n d er 2 8 U . S . C . § 1 2 9 1 , an d ap p lyp lena ryrev iew to the D istri ct C o u rt ’s g ra n t o f s u m m a ry ju d g m e n t. B on nevil l e Int ’l C orp. v. P et ers , 3 4 7 F . 3 d 4 8 5 , 4 9 0 (3d C ir . 2003) . T he pr i m aryi s s ue i n thi s appea l i s w hetherthe D i s tr i ctC our terr ed i n concl udi ng th a t th e f e d e ra l tax lien h e re c o u ld a ttac h to S h e ila P o p k y ’s in ter e st in th e N a rb e th p ro p e rtyo w n e d b yh e r a n d h e r h u sb a n d a s te n a n ts b yth e e n tiretie s. T h e n a tu re o f S h e ila P o p k y ’s in ter e st in th e N a rb e th p ro p e rtyis c ru c ial b e c a u se f e d e ra l tax lien s a ttac h to “ a ll pr opertyand r i ght s t o pr operty ” of a nyt axpay erw ho negl ect s orr efus es t o payt axes aft er d em an d . 2 6 U . S . C . § 6 3 2 1 . T h e S u p rem e C o u rth as m ad e c lear tha t w h ethe r a tax p ay er’s in ter e st in p ro p e rty“ h e ld a s a ten a n t b yth e e n tiretyc o n stitu tes ‘p ro p e rtya n d rig h ts to p r o p e r ty’ f

o rth e p u rp o s e s o f

th e f e d e r a l t a x l i e n s t a tu t e , 2 6 U . S . C . § 6 3 2 1 , i s u l t i m a t e l y a ques t i on of fe der al l aw . ” U n itedS ta tes v . C ra

ft , 5 3 5 U . S . 2 7 4 , 2 7 8 (20 0 2 ). H o w ev er, thi s fede r al ques t i on “l ar gel ydepends upon s t at e l aw . ” I d. See a l so U nited S tates v. B ess , 357 U . S. 51, 55 ( 1958) ( s t at i ng thatfede r al t ax l i en s t atut e “c r eat es no pr opertyr i ght s but m ere lyatt ac h es c o n seq u en ce s, fe d era ll yd ef ined , to ri g h ts created u n d er state law . ”). I n C ra ft , the Supr eme C our t , l ooki ng t o M i chi gan l aw , hel d thata fe der al t ax l i en r es ul t i ng fr om unpai d t axes attr i but abl e t o one t enantbythe ent i r et i es coul d att ach t o t hat t enant ’ s i nt er es ti n ent i r et i es pr operty . T he C our tfound thatM i chi gan’ s l aw of t enanc y b yth e e n tiretie s c o n f

e rre d “ so m e o f

th e m o st e ss e n tial p ro p e rtyrig h ts” o n e a c h ten a n t: “the ri g h t t o u se th e p rop erty , to rec eive inco m e p rod u ce d b yit , an d to ex clud e o thersW h ile M ich ig a n law d id n o t g iv e e a c h ten a n t th e p o w e r to u n ilate ra llya lien a te 1 ent i r et i es pr operty , the C our ti n C ra ft r ej ect ed the cont ent i on thats uch a pow erw as e s s e n tia l to th e c a te g o ry o f “ p ro p e rt y ” f

o r p u rp o s e s o f

§ 6 3 2 1 . C ra

ft , 535 U . S. at284 (n o tin g th a t in p rio r c a se s it h a d “ a lre a d ysta ted th a t f e d e ra l tax lien s m a ya ttac h to p rop ertythat ca n n o t be u n il aterall yali en ated . ”) (d iscu ssing ca ses). 4 fr om i t . ” C ra

ft , 535 U . S. at283 ( ci t at i ons om i t t ed) . I tal s o not ed thatM i chi gan l aw gave t enant s the r i ghtt o al i enat e orotherw i s e enc um berthe pr opertyw i th the cons entof the o th e r t e n a n t, a s w e ll a s th e ri g h t o f s u rv iv o rs h ip . I

d. T he C our tconcl uded thats uch esse n ti al ri g h ts i n p rop ertyen joy ed b ytena n ts bythe e n ti reti es u n d er M ichig an law w ere “r i ght s t o pr operty ” underthe fe der al t ax l i en s t atut e. 1 P enn sy l van i a’s l aw of tenancybythe en t i ret i es i s m at eri al l ysi m i l ar t o M i chigan’s, and thus l eads us t o the s ame r es ul tr eac hed bythe C our ti n C ra ft . A s i n M i chi gan, t e n a n t s b y th e e n t i r e t i e s i n P e n n s yl v a n i a h a v e th e r i g h tt o p o s s e s s a n d u s e th e p r o p e r ty, s ee U ni t ed Stat es v. P ar cel

of P r oper t y Know n as 1500 Li ncoln A ve. , 949 F. 2d 73, 77 ( 3d C ir . 1 9 9 1 ), t h e ri g h t to re c e iv e a s h a re o f in c o m e p ro d u c e d b yth e p ro p e rt y , s ee W yl i e v. Zi m m er , 98 F. Supp. 298, 300 ( E . D . Pa. 1951) ( “The r ent s , i s s ues and pr ofi t s fr om r eal p ro p e rtyh e ld b ye n tiretie s a re re c e iv e d a n d o w n e d in a lik e m a n n e r.”) ; Johns v. Johns , 52 P a. D . & C . 2 d 9 9 (P a. C o m . P l. 1 9 7 1 ) (eac h tena n t can co ll ec t and k ee p ren tal inco m e), a n d ri g h ts o f

s u rv iv o rs h ip . C l i nger m an v. Sadow s ki , 5 1 9 A .2 d 3 7 8 , 3 8 1 (P a . 1 9 8 6 ). T hes e r i ght s ar e s uffi ci entt o br i ng thi s cas e w i thi n C ra ft . W e ther efor e conc l ude thatT he Popky s emphasi ze thata t enanti n Penns y l vani a ca nnotal i enat e the ent i r et i es 2 p rop ertyw ith o u t th e o ther ten an t’ s co n sen t. T h is i s tru e b u t un av ail ing g iven the C o u rt ’s cl ears t at ementi n C ra

ft thatthe r i ghtof uni l at er al al i enat i on i s not“es s ent i al t o the cat egoryof ‘ pr operty ’ [under§ 6321] . ” C ra ft , 535 U . S. at284. T he Popky s al s o cont end thatthe governm entobt ai ned the es cr ow ed funds fr om 3 the ti t l e com pan yi m properl y , and that theyshou l d h ave b een p erm i t t ed to r et ai n an d u se th e $ 4 3 ,3 2 4 .4 3 su b

jec t to th e tax lien . W e se e n o m e rit in e ith e r a rg u m e n t. 5 M r s . Popkyhad “r i ght s t o the [N arbeth] pr operty ” ow ned byherand herhus band as t enant s bythe ent i r et i es t o w hi ch the fe der al t ax l i en her e coul d att ach. 2 A ppel l ant s al s o chal l enge the D i s tr i ctC our t ’ s val uat i on of M r s . Popky ’ s s har e of the e n ti reti es p rop ertyat 50 p erc en t. A g ain, ho w ev er, w e a g ree w ith the D istri ct C o u rt beca us e a 50 pe r centval uat i on acc or ds w i th the l ongs t andi ng Penns y l vani a comm on l aw d e f in itio n o f te n a n c ie s b yth e e n tir e ty. See In re Estate of B rose , 206 A . 2d 301, 304- 05 ( Pa. 1965) ( i n a t enanc ybythe ent i r et i es , “ea ch of the t enant s hol ds the ent i r e es t at e by the hal f and bythe w hol e. ”) . I ndeed, the i nt er es t s of t enant s bythe ent i r et i es ar e equa l b o th d u ri n g th e te n a n c ya n d f o llo w in g its te rm in a tio n . See In re P ri cha rd , 59 A . 2d 101, 1 0 2 (P a. 19 4 8 ). 3 A c c o rd in g ly , w e w ill a f f irm th e ju d g m e n t o f

th e D istric t C o u rt.