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

8-16-2005 

# P opky v . U S A

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al

D ock e t N o . 04-2798

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w . v i l l a no v a . e du/thir dc ir c uit_2005

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w . v i l l a no v a . e du/thir dc ir c uit_2005/600PREC EDENTIAL

U N IT E D S T A T E S C O U R T O F A P P E A LS F O R T H E T H IRD C IR C U IT

____________ No. 04-2798

____________ HOWARD D. POPKY; SHEI L A A. POPKY, Ap pe lla

nts

v.
UN I TE D ST AT ES O F AM ERI CA

____________ On Appea l from the United States District Court fo r t he Ea ste rn

Di str ic t of

Pe nn sylva

nia (D.C. No. 03-c v-01487) District J udg e: Honora

ble Thomas N. O’ Neill, J r.

____________ Submit ted Under

Third Circuit L AR 34.1(a) May 12, 2005

Be fore : SL OVI TER, FI SHER and AL DI SERT, Circuit Judges

.

(F iled: May

17, 2005)2 J ohn R. Cray

ton 33 West S econd Stre et Moorestown, NJ 08057 At tor ne yfor Ap pe lla nts

J oan I . Oppenhe imer J onathan S. Cohen United States Depa

rtment of Just ice Tax Divisi on P.O. Box 502 Washington, DC 20044 Attorneys for Appellee

____________ OPI NI ONOF TH E CO UR T

____________ FI SHER, Circuit Judge

. Appellants Howa

rd and Sheila Popky , husband and w ife, appea l from the District Court’s gra nt of summary

judgme nt in the g overnme n t ’s favor in connec tion with their attempt to recove r monies obtained by

the g o v er nment in satisfaction of a tax l ien. Ap pe lla nts c on te nd

tha t the fe de ra l tax li e n c ou ld no t atta c h to She ila Pop ky ’s int e re st in pro pe rt y owne d by he r an d he r hus ba nd a s te na nts by the e nti re tie s. Ap pe lla

nts a lso a rgue that e ve n if

the tax lie n c ou ld attach to Sheila Popky ’s i ntere st, the Dis trict Court err ed in valuing he r i nte re st at f

if ty pe rc e nt o f t

he property . We dis a g re e wi th Appellants on both points and will ther efor e af firm the judg ment of the Di str ic t Co ur

t.3 I. Sheila Popky

had fa iled to pay

employ ment taxes that were require d to be withheld from the wag es of the employ ees of Sheila’s EMS, I nc., a busine ss which s he owne d. The Interna l Revenue Service (“I RS”) assessed tax es o f $ 4 2,799.20 ag ainst Sheila Popky attributable to these unpa id tax es, an d i n September 2002, f iled a notice of tax lien ag ainst her in Montgome ry County , Pennsylvania, for the sa me amount plus acc ruals. Shortly afte r the filingof the lien notice, the Popky s sold re al proper ty located in Na

rbeth, Pe nn sylva

nia , wh ic h the y owne d a s te na nts by the e nti re tie s. Th e tit le insurance company

held $48,000 of the sa le proc eeds in e scrow due to t he outst and ingfe de ra l tax lie n, and e ve ntually

iss ue d a c he c k to t h e g o v e r n m e n tf o r $ 4 3 , 3 2 4

. 4 3 t o s at i s f

y th e l i e n

. T h e P o p kys ini tiate d th is q

uie t ti tle a c tio n to re c ov e r the pr oc e e ds pa id to t he I RS, and the g overnme nt counterc laimed see king unpa id employ ment taxes and unpaid income taxes. The District Court grante d summary judgme nt to the gove rnment and e ntere d an orde r aw ardingthe g overnme nt $43,324.43 on the Popky s’ claim and $15,814.47 on the g ov e rnme nt’ s c ounte rc la im. Th e Pop ky s f ile d th is t ime ly

a pp e a l.

II.

The District Court had jurisdi ction under 28 U.S.C. §§ 1331, 1340 and 1345. W e h av e jurisdiction under 28 U .S.C. § 1291, and apply plenar y rev i ew t o the District Court’s g rant of summar y judgme nt. Bo nn e v ille I

nt’ l Co rp . v . P e te rs , 347 F.3d 485, 490 ( 3d Cir. 2003). The pr imary i ssue in this appeal is whethe r the District Cou rt er re din concludingthat the fe dera l tax lien here could attac h to Sheila Popky ’s intere st in the Narbe th property owned by her a

nd her husband as t enants by the entireties. The nature of Sheila Popky ’s interest in t h e Na rb eth prope rty is crucia l beca

use fe dera l tax liens attach to “ all proper

ty and rig hts to pr o p er t y ” o f any taxpay er whoWhil e Mic higan law did no t g ive e a c h te na

nt t he po we r t o 1 unilatera lly

alienate entireties pr operty , the Court in Cra ft reje cted the contention that such a

power was esse ntial to the categ ory of “prope rty” for

purposes of § 6321. Cra

ft , 535 U.S. at 284 (noting that in prior cases it had “alrea dy stated that fe dera l tax liens may attach to property

that cannot be unilatera lly alienate d.”) ( discussing c ases)

.

4 neg lects or r efuse s to pa

y taxes a fter demand. 26 U.S.C. § 6321. The Sup re me Court

ha s ma de c le ar t

hat w he ther a ta xpay e r’ s inte re st i n proper ty “he l d as a tena

nt by the entire ty

constitutes ‘proper

ty and rig hts to property ’ for

the purposes of the fede ral tax lien statute, 26 U.S.C. § 6321, is ulti mately a question of f

eder al law.” United States
v . Cr aft , 535 U.S. 274, 278 (2002). Howe ver, this fe dera l question “lar g ely depends upon state l aw.” Id. Se e als o U nite d S tates v . B ess , 357 U.S. 51, 55 (1958) (statingthat fede ral tax lien statute “c reates no proper ty rig hts but mer ely

attache s conseque nces, f eder ally define d, to rig hts crea

ted under state law.” ).

In Cra ft , th e Sup re me Co urt, loo kin gto M ic hig an la w, he ld that a fe dera l tax lien resulting from unpaid taxes attributable to one te nan t by the e nti re tie s c ou ld a

tta c h to tha

t te na nt’ s inte re st i n entireties pr operty . The Court found that Michig an’s law of tena ncy by the e nti re tie s c on fe rr e d “ so me of the mo st es se nti a l pr op e rt y rig hts” on ea ch tena

nt: “th e right to use the proper ty , to rec eive income produced by

it, and to exclude others from it.” Cra ft , 535 U.S. at 283 (citations om itted). I t also noted t hat M ichig an law g ave te na nts the ri g ht t o a lie nate or oth e rw ise e nc umb e r t

he pr op e rt

y wi th the conse nt of the other t enant, a s well as the r ight of survivorship. Id. Th e Court

c on c lud e d th at su c h e sse nti a l r ig hts in p ro perty
e njo y e d by te na

nts by the e nti re tie s und e r M ic hig an la w w e re “ ri g hts to property” under

the fede ral tax l ien statute, and the ref ore that the fede ral tax lien there p ro p er l y attache d to the responsible tena nt’s i n t e r e s ti nth e e n t i r e t i e s p r o p e rty. 1The Popky s emphasize that a tenant in Pennsy lvania ca nnot 2
a lie nate the e nti re tie s p ro pe rt y wi tho ut t

he oth e r t e na

nt’ s c on se nt. This is true but unavailingg iven the Court’s cle ar state ment in Cra ft that the rig ht of unilatera l alienation is not “essential to the c ateg ory of ‘pr operty ’ [under § 6321].” Cra ft , 535 U.S. at 284.
5 The Cra ft ana ly si s re qu ir e s u s to loo k to the law o f t he state wher e the su

bje c t pr op e rt

y is l oc ate d, he re , Pe nn sylva nia . B e c a

us e Pennsylvania’s law of tenanc y by the entire ties is materially simil ar to Michiga

n’s, we a re c ompelled to rea ch the same re sult reac hed by the Court in Cra

ft . A s in

Mic hig an, te na

nts by the e nti re tie s in Pennsylvania h av e t h e rig ht to possess and use the prope rty , see United States v. Parcel of Property Known as 1500 L incoln Ave

. , 949 F .2 d 7 3, 77 (3 d Ci r. 19 91 ), the ri g ht t o r e c e ive a sh are of inc ome produce d by

the prope rty , see W

ylie v. Zimmer , 98 F. Supp. 298, 300 (E .D . Pa . 1 95 1) (“ Th e re nts , iss ue s and pr of its fr om re a l pr op e rt

y he ld by e nti re tie s are re c e ive d and owne d in a like mann e r. ” ); Johns v. Johns , 52 Pa. D. & C. 2d 99 (Pa. Com. P l. 1971) (ea ch tena nt can collect a nd keep r ental income) , and rights of survivorship. Clingerman v. Sadowski , 51 9 A .2 d 3 78 , 3 81 (P a . 1 98 6) . T he se ri g hts
are sufficie nt to bring this c ase w ithin Cra ft

. We there fore conclude that Sheila Popky

had “r ights to the [Narbe th] proper ty ” owned by

her and her husband as tenants by

the entire ties to which the fe dera l tax lien here could attac h. 2
Ap pe lla nts c on te nd

that e ve n if

the fe deral tax lie n p ro pe rl y attache d to Sheila Popky ’s i n t erest in the proce eds fr om the sale of the Na rb e th p ro pe rt

y , the Di str ic t Court e rr e d in v a lui nghe r i nte re st at fifty perc ent of the prope rty . In Cra ft , the Supreme Court lef

t open the qu e sti on of howto v a lue the re sp e c tiv e te na nts ’ i nte re sts in entireties property in these circ umstances. Se e Cra ft , 535 U.S. at 289 (“We e x press no viewas to t he prope r valuation of responde nt’s husband’s intere st in the entireties pr operty”). The Popky s arg ue that6 the valuation should be based on some variation of thei r l ife expectancie s. Some courts have adopted or endorse d the use of life expectancie s derived f

rom ac tuarial table s in determ i n i n g the value of a tenant’s interest in entireties prope rty in this contex t. See, e .g., In re Murray , 3 1 8 B

. R

. 2 1 1 , 2 1 4 ( B an kr

. M

. D

. F l a

. 2 0 04 ); In re Basher , 291 B.R. 357, 364 (B ankr. E.D . Pa. 2003). The District Court pro p erly reje cted this approa ch. Va luing the intere sts of tenant s b y t h e entire ties equally acc ords with the longst a n d in g Pe nn s y lv a n ia c o mmon law definition of tenanc ies by the entirety

. Se e In reEs tate of B ro se , 206 A.2d 301, 304-05 (Pa. 1965) (in a tena ncy by the entire ties, “ea ch of the tenants holds the entire
e state by the ha lf and by the wh ole .” ); Lindenf

el s er v. L indenfelser , 153 A. 2d 901, 905 (Pa. 1959) ( noting that e ach spouse in a tenanc y by the entire ties “is entitled to equal use , enjoy ment, and possession” and “e ntitled equally

to the usufruc t of the properties.”) . As the Di str ic t Co ur

t c or re c tly ob se rved, “the e qu a l di vis ion of a sse ts be tw e e n s po us e s .

.. pa

ra lle ls the dis tr ibutio n o f e nti re tie s p ro pe rt y when a n entireties e state is sever ed bec ause of a sale with c onsent of bo th t e na nts , d ivo rc e or

oth e r re a so ns .” 32 6 F . Su pp . 2 d at 60 2; see also Reifschneider v . Reifschneide r , 1 9 6 A

. 2 d 3 2 4 ( Pa

. 1964) (holding that wife was entitled to f ifty perc ent share of proce eds fr om hu sb and ’s sa le of

bo nd s) ; In rePr ic ha rd , 59 A.2d 10 1 , 1 0 2 (Pa. 19 48 ) ( ob se rv ingtha

t w hen te na

nts by the e nti re tie s a g re e to terminate the tenanc y

and sell the prope rty , th e s al e procee ds are divided equally betwee n them). Sound policy reinfor ces the District Court’s approa ch to valuation, as a n equal va luation is far

simpler and le ss s pe c ulat ive tha

n th e va luatio n c on te mpl ate d b y the Pop ky s. Thus, we a g ree with the Dis trict Court’s valuation of S heila Popky ’sThe Popky s also contend that the g overnme nt obtained the 3
escr owed f

un d s from the tit le company improperly , and that they should ha ve been permitted to reta in and use the $43,324.43 subjec t to t he tax lie n. We s e e no me ri t in e ith e r a rgume nt.
7 int e re st i n th e pr oc e e ds fr om t he sa le of the Na

rb e th pr op e rt

y at f if ty pe rc e nt. 3

Acc ording ly , we will af firm the judg ment of the Di s trict Court

.