Court Opinion

ID: 771222
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:47:35+00
Date Added: 2024-06-11T13:05:50.766685
License: Public Domain

233 F.3d 358 (6th Cir. 2000)
Sandra L. Craft,  Plaintiff-Appellee/Cross-Appellant,v.United States of America, acting through the Commissioner  of Internal Revenue,  Defendant-Appellant/Cross-Appellee.
Nos. 99-1734, 99-1737
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Argued: August 10, 2000Decided and Filed: November 22, 2000

Appeal from the United States District Court for the Western District of Michigan at Grand Rapids.  No. 93-00306--Gordon J. Quist, District Judge.[Copyrighted Material Omitted][Copyrighted Material Omitted]
Jeffrey Alan Moyer, DONOVAN, LOVE & TWINNEY, Grand Rapids, Michigan, for Appellee.
Joan I. Oppenheimer, David English Carmack, U.S. DEPARTMENT OF JUSTICE, APPELLATE  SECTION TAX DIVISION, Washington, D.C., for Appellant/Cross-Appellee.
COLE, J., delivered the opinion of the court, in which KEITH, J., joined. GILMAN, J. (pp. 376-79), delivered a separate  opinion concurring in the judgment.
Before: KEITH, COLE, and GILMAN, Circuit Judges.
OPINION
R. GUY COLE, JR., Circuit Judge.

1
This case is before us for the second time. In Craft v. United States, 140 F.3d 638  (6th Cir. 1998) (hereinafter, "Craft I"), we held that a federal tax lien against Plaintiff-Appellee Sandra L. Craft's  now-deceased husband, Don, did not attach to property held by the couple in a "tenancy by the entirety" under Michigan  law. On remand, the district court found that Defendant-Appellant the United States of America ("IRS," or "the  government") was nonetheless entitled to $6,693 with which Don had fraudulently enhanced the entireties property. Now, the IRS appeals the district court's judgment on the basis that the Craft I panel misconstrued the law. Sandra responds that  the IRS is precluded from raising this argument on appeal by the "law of the case" doctrine and other principles. Sandra  also raises a number of claims in a cross-appeal. For the following reasons, we DISMISS the IRS's effort to overturn Craft  I as precluded by both the law of the case doctrine and the rule that one panel of this court may not overrule the prior  decision of another panel. We AFFIRM the decision of the district court regarding Sandra's claims.

I. BACKGROUND

2
The essential facts of the case are as follows1.  In May 1972, Sandra Craft andher husband, Don, purchased real  property (known as the "Berwyck Property," for the road on which it was located) in Michigan as tenants by the entirety. Craft I, 140 F.3d at 639. Don failed to file federal income tax returns for tax years 1979 through 1986, and, in July 1988,  the IRS assessed $482,446.73 against him in unpaid tax liabilities. Id. Don failed to pay his tax debts, and the IRS filed a  notice of federal tax lien in March 1989 against all of Don's property and rights to property. Id.; see also I.R.C. §6321. Don  was insolvent during the period from April 1980 through August 1989.

3
On August 28, 1989, Don and Sandra transferred the Berwyck Property to Sandra by way of a quitclaim deed, in  exchange for one dollar. Craft I, 140 F.3d at 639. In June 1992, Sandra sold the property to a third party for $119,888.20. Id. at 640. Pursuant to an agreement between Sandra and the IRS, Sandra kept half of the proceeds ($59,944.10); the other  half was placed in a non-interest-bearing escrow account, subject to the same right, title, and interest that the federal tax  lien had on the property. Id. In April 1993, Sandra filed a complaint pursuant to 28 U.S.C. §2410(a), seeking to quiet title  to the proceeds in the escrow account. Id. In its answer, the government argued that it was entitled to half of the proceeds  from Sandra's sale of the property because its lien attached to Don's interest in the Berwyck Property, even though Don and  Sandra had held the property as tenants by the entirety. Id. The government also claimed that Don had fraudulently  conveyed his interest in the property to Sandra. Id.

4
Both parties moved for summary judgment in September 1993. The district court denied Sandra's motion and granted  the government's motion in September 1994. See id. at 640. The district court held that at the time of the August 1989  conveyance, Don and Sandra's entireties estate terminated and each spouse took an equal half interest in the estate. Id. Accordingly, the district court held that the federal tax lien attached to Don's interest at that time. Id. Upon Sandra's motion,  the court conducted further proceedings to determine the value of Don's interest at the time of the termination of the  tenancy by the entirety. See id. After a telephonic hearing, the court found in October 1996 that the value of Don's property  to which the IRS lien attached was $50,293.942.  See id. at 641. The court then ordered that the IRS receive that amount  from the escrowed proceeds. Id.

5
On cross-appeals to this court, the Craft I panel reversed the district court's ruling, holding that "[b]ecause Michigan law  does not recognize one spouse's separate interest in an entireties estate, a federal tax lien against one spouse cannot attach  to property held by that spouse as an entireties estate." 140 F.3d at 643. The panel also held that, under Michigan law, "Don  did not possess a separate future interest in the Berwyck Property; therefore, the federal tax lien could not attach to a future  interest that did not exist under Michigan law." Id. at 644. After finding that Don had no present or future interest in the  disputed property, the court remanded the case for determination of "whether a fraudulent conveyance occurred in this  case." Id. at 644. Judge Ryan concurred in the majority's result, but argued that Don had a separate, future interest in the  entireties property to which the tax lien might attach if the August 1989 transfer to Sandra were set aside as fraudulent. See  id. at 649.

6
On remand, the district court conducted a bench trial. In written findings of fact and conclusions of law made in March  1999, the district court concluded that, althoughthe transfer of the Berwyck Property to Sandra by quitclaim deed did not  constitute a typical fraudulent conveyance under Michigan law, the government was entitled to relief under an exception to  that law, see McCaslin v. Schouten, 292 N.W. 696, 699 (Mich. 1940). The court found that under the exception, a creditor  may obtain relief "where the debtor, while insolvent, places non-exempt funds beyond the reach of his creditors by  enhancing the entireties property." See id. The court reasoned that from 1980 through 1985, while he was insolvent, Don  and Sandra had used Don's funds to enhance the property by making a total of $6,693 in mortgage payments (excluding  interest) on its behalf. The court found that Don's actions constituted a type of fraudulent conveyance under Michigan law,  and that the government was entitled to recover the value of the mortgage payments ($6,693) plus interest (from the date of  the court's October 1995 judgment) from the escrowed sales proceeds3.  Sandra filed a motion to amend the judgment,  arguing that the court should reverse its award of interest on the $6,693 it awarded to the IRS. Sandra also moved the court  to award her interest, pursuant to 28 U.S.C. § 2411, on the funds that the IRS would have to return to her4.  The court  granted Sandra's motion in part, deleting the interest awarded to the IRS, but denied her request for interest.

7
The government filed a timely notice of appeal and Sandra filed a timely notice of cross-appeal in June 1999. In October  1999, the government petitioned this court for en banc review of the CraftI decision. The government argued that the Craft  I decision -- as well Cole v. Cardoza, 441 F.2d 1337 (6th Cir. 1971) (holding that federal government may not, under  Michigan law, attach lien to entireties property to satisfy individual tax liability of one spouse), a prior decision upon which  the Craft I court relied -- conflicted with established, controlling precedent. This court rejected the petition in December  1999.

II. THE GOVERNMENT'S APPEAL

8
At this juncture, this case is not really about federal tax liens. Nor is it about state law property rights. This case is about  the extent to which a prior decision of this court binds a subsequent panel when neither the facts, the parties, nor the law  has changed. On appeal, the IRS reasserts its argument that a § 6321 federal tax lien against an individual taxpayer attaches  to a tenancy by the entirety that the taxpayer shares, pursuant to Michigan law, with his spouse. This is, of course, the very  argument we rejected in Craft I. For the reasons that follow, the government is precluded from re-arguing its case at this  time.

A. Law of the Case

9
Under the law of the case doctrine, a court ought not reopen issues decided at an earlier point in the same litigation. See  Agostini v. Felton, 521 U.S. 203, 236 (1997). "Issues decided at an early stage of the litigation, either explicitly or by  necessary inference from the disposition, constitute the law of the case." Hanover Ins. Co. v. American Eng'g Co., 105 F.3d  306, 312 (6th Cir. 1997) (citation and quotation marks omitted). Although the doctrine of law of the case is "not an  inexorable command," and courts must use "common sense" in applying it, see id., the power of this court to reach a result  inconsistent with a prior decision reached in the same case is "to be exercised very sparingly, and only under extraordinaryconditions." General Am. Life Ins. Co. v. Anderson, 156 F.2d 615, 619 (6th Cir. 1946) (citation and quotation marks  omitted). We have delineated three such extraordinary conditions in which we will reconsider a prior ruling in the same  case: "(1) where substantially different evidence is raised on subsequent trial; (2) where a subsequent contrary view of the  law is decided by the controlling authority; or (3)where a decision is clearly erroneous and would work a manifest  injustice." Hanover Ins. Co., 105 F.3d at 312. For the reasons that follow, the IRS fails to articulate the "extraordinary  conditions" necessary for us to rehear the claims we have already rejected.

1. Clearly Erroneous and Manifest Injustice

10
The IRS looks first to the third exception, arguing that this court can revisit the issues decided by the Craft I panel  because that panel's decision was clearly erroneous and would work a manifest injustice5.  The government's argument is  not persuasive because Craft I was not clearly erroneous.

11
The Craft I panel had before it circuit precedent that squarely addressed the issue before the court. In Cole, this court  held that a federal tax lien against a taxpayer did not attach to property owned by the taxpayer and his wife in a tenancy by  the entirety. See 441 F.2d at 1343. Neither this court nor the Supreme Court has ever expressly overruled Cole.  Nonetheless, the IRS contends that Cole has been effectively overruled by Supreme Court decisions subsequent to it. But  no Supreme Court case has directly addressed the question before both the Cole and Craft I courts6.  It is true that the  Court has addressed the power of a federal tax lien to attach to state law property constructs other than a tenancy by the  entirety, but the Court has done so only on narrow grounds. For instance, in United States v. National Bank of Commerce,  472 U.S. 713 (1985), the Court held that the IRS had a right to levy upon a joint bank account for delinquent federal  income taxes owed by only one of the owners of the account. See id. at 715, 724. After discussing the specific  characteristics of the taxpayer's rights under state law and under his contract with the bank, see id. at 723-24, the Court was  crystal clear about the specificity of its holding:

12
We stress the narrow nature of our holding. By finding that the right to withdraw funds from a joint bank account is a  right to property subject to administrative levy under § 6331, we express no opinion concerning the federal  characterization of other kinds of state-law created forms of joint ownership. This case concerns the right to levy only  upon joint bank accounts.

13
Id. at 726 n.107.  Likewise, in United States v. Rodgers, 461 U.S. 677 (1983), the Court held that I.R.C. §7403 permits adistrict court to order the sale of a delinquent taxpayer's home, despite the fact that his wife, with whom he owned the home  pursuant to a state homestead law, did not owe any of the indebtedness. See id. at 680. As the Craft I panel noted, however,  the Rodgers Court "recognized that tenancies by the entirety posed a problem distinct from that of homestead estates, in  that neither spouse owns an independent interest in an entireties property while both spouses own independent interests in a  homestead estate." 140 F.3d at 643 (citing Rodgers, 461 U.S. at 702-03 n.31). Thus, as the Craft I panel was presented with  no binding precedent that overruled Cole, we cannot say that its decision was clearly erroneous8.

14
In finding that our decision in Craft I was not clearly erroneous, we acknowledge that there are colorable arguments on  both sides of the question whether a federal tax lien against a taxpayer's "property" or "rights to property," see I.R.C.  §6321, attaches to a tenancy by the entirety. Indeed, Judge Ryan's concurrence in Craft I illustrates this point, see 140 F.3d  at 645-49 (Ryan, J., concurring) (arguing that, if transfer of property to Sandra Craft were to be set aside, federal tax lien  would attach to Don Craft's "future interest" in Berwyck property), as does Judge Gilman's separate concurrence in the  instant appeal. We further recognize that this court has held that federal law supersedes state property law in other  circumstances. See, e.g., Bank One Ohio Trust Co., N.A. v. United States, 80 F.3d 173, 176 (6th Cir. 1996) (finding that  restraint on alienation created by state law does not prevent federal lien from attaching to spendthrift trust under §6321); Grosslight v. Liberty State Bank and Trust (In re Grosslight), 757 F.2d 773, 775 (6th Cir. 1985) (finding that property held  as tenancy by the entirety is part of bankruptcy estate). But the fact that colorable arguments exist on both sides of a  particular issue does not imply that the Craft I panel's decision is "clearly erroneous." There are colorable arguments in  virtually every case we hear. To hold that their existence in the present case permits us to reopen an issue we have already  settled in this very case would destroy the concept of finality in our courts, negate the predictability our legal system  provides to people in the conduct of their affairs, and risk the unjust results that would surely follow were litigants to  "panel-shop" and pursue, willy-nilly, two or more bites at the apple of settled law.

15
The Craft I panel was bound by circuit precedent that was directly on point in reaching the conclusion it reached9.  It was faced with no Supreme Court precedent that directly held otherwise, and this court has reiterated the holding relied  upon by the Craft I panel on more than one occasion. Further, other courts have reached results consistent with that reached  by the Craft I panel. For these reasons, we reject the IRS's argument that the decision reached by the Craft I panel was  "clearly erroneous."10

2. Subsequent Contrary View of the Law

16
The IRS also argues that the law of the case doctrine does not apply here because the Supreme Court's recent decision in Drye v. United States, 120 S. Ct. 474 (1999), decided after Craft I, states a view of the law that is contrary to that expressed  in Craft I. See Hanover Ins. Co., 105 F.3d at 312. In Drye, the Court held that a taxpayer could not defeat a federal tax lien  by disclaiming, pursuant to state law, his interest in his mother's estate. 120 S. Ct. at 478. The IRS argues that Craft I conflicts with the Drye Court's statements that: 1) federal law determines whether a right or interest created under state law  constitutes "property" or "rights to property" for purposes of the federal tax lien statute, see Drye, 120 S. Ct. at 481; and 2)  state law legal fictions do not bind the federal government for purposes of the federal tax lien statute, see Drye, 120 S. Ct.  at 482. At oral argument, the IRS added that Drye stands for the "new" legal rule that a federal tax lien attaches to a  taxpayer's right to inherit property. Upon careful review, we find that Craft I is essentially consistent with the Drye Court's  reasoning.

17
a.

18
In Drye, the taxpayer (Drye) was insolvent, and the IRS had obtained valid tax liens against all of his "property and  rights to property" pursuant to I.R.C. § 632111.  Id. at 479. Drye's mother died, and Drye was sole heir to her $233,000  estate. Id. at 478. Drye "disclaimed" all his interests in his mother's estate pursuant to state law; as a result, the estate passed  to Drye's daughter. Id. at 479. Drye's daughter established a spendthrift trust with the proceeds of her grandmother's estate,  naming as beneficiaries herself, Drye, and her mother. Id. Although applicable state law provided that the assets of a spendthrift trust were shielded from creditors seeking to satisfy debts of the trust's beneficiaries, see id., the Court held that  Drye's disclaimer did not defeat the government's tax liens. Id. at 478. The Court summarized the relationship between  §6321 and state law as follows:

19
The Internal Revenue Code's prescriptions are most sensibly read to look to state law for delineation of the taxpayer's  rights or interests, but to leave to federal law the determination whether those rights or interests constitute "property"  or "rights to property" within the meaning of § 6321. "[O]nce it has been determined that state law creates sufficient  interests in the [taxpayer] to satisfy the requirements of [the federal tax lien provision], state law is inoperative to  prevent the attachment of liens created by federal statutes in favor of the United States."

20
Id. at 478 (quoting United States v. Bess, 357 U.S. 51, 56-57 (1958) (brackets in original)). Under the approach taken in Drye, "We look initially to state law to determine what rights the taxpayer has in the property the Government seeks to  reach, then to federal law to determine whether the taxpayer's state-delineated rights qualify as 'property' or 'rights to  property' within the compass of federal tax lien legislation." Id. at 481.

21
The IRS argues that the Craft I panel failed to apply this rule and relied instead on Michigan law to determine whether a  taxpayer's involvement in a tenancy by the entirety constitutes property for the purposes of §6321. We are not persuaded.  First, we note that the SupremeCourt had stated prior to Drye the rule that a court must look to federal law to determine  whether something constitutes "property" or "rights to property" for purposes of §6321. See, e.g., United States v. Irvine,  511 U.S. 224, 238 (1994) (noting the "general and longstanding rule in federal tax cases that although state law creates  legal interests and rights in property, federal law determines whether and to what extent those interests will be taxed"); National Bank of Commerce, 472 U.S. at 727 (stating that, "[t]he question whether a state-law right constitutes 'property' or  'rights to property' is a matter of federal law" for purposes of federal tax collection)12.  The Craft I court was aware of that  rule, see 140 F.3d at 641, and, more important, applied it properly13.

22
The Craft I court's analysis is consistent with the two-step analysis described in Drye. See 120 S. Ct. at 481. The Craft I court first looked to Michigan law and found that: 1) Michigan law holds that an individual spouse possesses no separate  interest in entireties property, Craft I, 140 F.3d at 643, and 2) Michigan law holds that an individual spouse possesses no  future interest in entireties property, see id. at 64414.  Thus, under Michigan law, Don had no individual interest in the  entireties property; and, because state law delineated no individual interest or right held by Don, there was nothing for  federal tax law to deem to be "property" or "rights to property" for purposes of I.R.C. §6321. Accordingly, Craft I is  fundamentally consistent with Drye. See Rodgers, 461 U.S. at 702-03 n.31 (stating thatcases which have found that a  federal tax lien does not attach to a tenancy by the entirety "because neither spouse possessed an independent interest in the  property . . . do no more than illustrate the proposition that, in the tax enforcement context, federal law governs the  consequences that attach to property interests, but state law governs whether any property interests exist in the first place."  (citing United States v. American Nat'l Bank of Jacksonville, 255 F.2d 504, 506 (5th Cir. 1958); United States v.  Hutcherson, 188 F.2d 326, 331 (8th Cir. 1951)); see also 14 Mertens Law of Fed. Income Tax'n §54A:13 (Supp. 2000)  (citing Craft I for proposition that, although federal law determines whether a lien will attach to property interests held by  delinquent taxpayer, "whether and to what extent a taxpayer has 'property' or 'rights to property' are [sic] determined under  the applicable state law." (footnote omitted)).

23
b.

24
The IRS also argues Craft I is inconsistent with the Drye Court's refusal to subjugate federal tax law to state law legal  fictions. See Drye, 120 S. Ct. at 482 (stating that "federal tax law 'is not struck blind by a disclaimer'" (quoting Irvine, 511  U.S. at 240)). But this proposition, too, had been established prior to Craft I, and the Craft I court was well aware of it. See Craft I, 140 F.3d at 643 (discussing Irvine, 511 U.S. at 240)). Indeed, the Craft I court rejected the IRS's argument that it  was being duped by a state law legal fiction. See id. We again reject the IRS's argument and find that the aspect of Drye reiterating the admonition regarding state law fictions is not a subsequent contrary view of the law. See Hanover Ins. Co.,  105 F.3d at 312; Craft I, 140 F.3d at 643.

25
c.

26
We are not at all persuaded by the IRS's last-minute characterization of Drye as standing for the proposition that a right  to inherit property is subject to a federal tax lien. Because Don Craft had a conditional right to take the Berwyck property  by survivorship pursuant to Michigan law (i.e., should Susan predecease him), the argument goes, see Craft I, 140 F.3d at  642 (citing Leroy Lane I, 910 F.2d at 347), he comes under this purportedly "new" rule. This rendering of Drye is patently  overbroad. If the Supreme Court intended to hold that every conceivable interest in property, no matter how remote, is  subject to a federal tax lien, we have little doubt that it would have said so outright. We do not think it so held. Indeed, the Drye Court specifically stated (demonstrating that "analogy is somewhat hazardous in this area," see Rodgers, 461 U.S. at  685-86) that a mere expectancy is not sufficient to constitute "property" or "rights to property" pursuant to § 6321: "Nor do  we mean to suggest that an expectancy that has pecuniary value and is transferable under state law would fall within §6321  prior to the time it ripens into a present estate."15 120 S. Ct. at 482-83 n.7; see also United States v. Murray, 217 F.3d 59,  63 (1st Cir. 2000) (stating that, pursuant to Drye, §6321 is to be construed broadly, "but there are limits that reflect both  common usage and policy. For example, the lien would likely not attach to land owned by a still-living relative of [the  taxpayer], or to [his] expected inheritance of it, even if the relative had provided in his will that the land would go to [the  taxpayer] on the relative's death.")16.  Thus, we reject the government's argument that Drye stands for the proposition that  a federal tax lienattaches to any right to inherit property, no matter how remote17.

27
d.

28
In sum, Drye has not so fundamentally changed the legal landscape as to overrule Craft I. See Blachy v. Butcher, 221  F.3d 896, 907 (6th Cir. 2000) (Gilman, J.) (post-Drye decision distinguishing holding of Craft I from question of how to  treat entireties property in bankruptcy case); United States v. Green, 201 F.3d 251, 253 (3d Cir. 2000) (citing Drye, 120 S.  Ct. at 478, and indicating that federal tax lien does not attach to property held as tenancy by entirety pursuant to  Pennsylvania law); see also Edward Kessel and Steven R. Klammer, Supreme Court Finds Disclaimer Ineffective to Avoid  Federal Tax Lien, 92 J. Tax'n 118, 122 (2000) (discussing impact of Drye and suggesting that, even after decision, federal  tax lien law may not apply to dower, curtesy, or elective share rights). Accordingly, the IRS's argument on appeal is  precluded by the law of the case doctrine.

B. Law of the Circuit

29
Our decisions in Craft I and in Cole are also law of the circuit. As we recently stated, "One panel of this court may not  overturn the decision of another panel of this court -- that may only be accomplished through an en banc consideration of  the argument." Pollard v. E.I. DuPont de Nemours Co., 213 F.3d 933, 945 (6th Cir. 2000). As discussed, supra, Craft I is  not clearly erroneous, and it has not been called into doubt by any decision of the Supreme Court.18 Because this panel  may not conduct a plenary review of the result reached by a prior panel, the decision reached by the Craft I must stand19.

III. SANDRA'S CROSS-APPEAL

30
In her cross-appeal, Sandra first argues that the IRS was precluded from arguing on remand the fraudulent enhancement  theory upon which it ultimately won relief. Next, Sandra argues that the governing statute of limitations barred the IRS's  recovery under its fraudulent enhancement theory. Third, she claims that the IRS's remedy became moot upon Don's death.  Finally, Sandra asserts that the IRS owes her interest on the funds to which she became entitled pursuant to our opinion in Craft I. Sandra has also submitted to this court a motion for costs under both Fed. R. App. P. 38 and the Equal Access to  Justice Act, 28 U.S.C. §2412. For the reasons that follow, we AFFIRM the judgment of the district court and DENY Sandra's motion for costs.

A.

31
Upon remand, the IRS argued two theories of recovery before the district court: first, that the August 1989 transfer from  Don and Sandra to Sandra was a fraudulent conveyance pursuant to Michigan law, see Mich. Comp. Laws §§566.11-.23;  and second, in the alternative, that Don's paymentof mortgage and property tax obligations20 from 1979 to 1985 on  behalf of the entireties property constituted a voidable, fraudulent enhancement of the property. Sandra objected to the  fraudulent enhancement theory (she contends that she did do early and often, see infra) on the grounds that the IRS had not  raised the theory until immediately prior to trial, and that the theory went beyond the scope of this court's remand. The  district court rejected Sandra's objection, and found that although the IRS had not raised specifically the fraudulent  enhancement issue in its answer to Sandra's complaint,21 the issue was tried by the implied consent of the parties,  pursuant to Fed. R. Civ. P. 15(b).

32
In her cross-appeal, Sandra argues that the district court erred by permitting the IRS to argue on remand its new theory  of fraudulent enhancement. First, Sandra asserts that the fraudulent enhancement issue went beyond the scope of this  court's remand. Second, Sandra claims that she did not consent to trial of the new theory, but rather "objected repeatedly,  vehemently and at every possible opportunity to the IRS raising a new issue for the first time on remand." Appellee's Br. at  16. For the reasons that follow, Sandra's arguments fail.

1. Scope of Remand

33
Sandra contends that the only issue before the district court on remand was whether she and Don fraudulently  transferred the property to Sandra when they executed the August 28, 1989 quitclaim deed. See Craft I, 140 F.3d at 644.  The IRS claims that this court left open the broader question of whether any fraudulent conveyance occurred with regard to  the Berwyck Property. The Craft I court stated as follows:

34
[T]here remains an issue of whether a fraudulent conveyance occurred in this case, an issue that the district court did  not address. Under Michigan law, one spouse cannot use the doctrine of tenancy by the entirety to defeat the rights of  a judgment creditor. Such a fraudulent transfer can be set aside . . . . The issue of whether a fraudulent conveyance  occurred in this case is a matter that should be determined by the district court. If the conveyance was fraudulent and  therefore set aside, the IRS could be entitled to half the proceeds of the June 1992 sale, or $59,944.10. Accordingly,  upon remand, the district court should consider whether the Berwyck Property was transferred for fraudulent  purposes.

35
Id. (citations omitted).

36
The district court did not exceed the scope of our remand by considering the issue of whether Don's mortgage payments  constituted a fraudulent transfer under Michigan law. The last sentence of the above-quoted section of Craft I, which  directed the district court to "consider whether the Berwyck Property was transferred for fraudulent purposes," does not  raise exclusively the question of whether the August 1989 transfer itself was fraudulent; rather, it permitted the district  court to consider also whether Don and Sandra transferred the property for other fraudulent purposes as well. See id. This  conclusion is consistent with the opening sentence of the Craft I court's fraudulent conveyance discussion, which states in  broad terms that "there remains an issue of whether a fraudulent conveyance occurred in this case." See id. It is also  consistent with this court's broad statement that, "[t]he issue of whether a fraudulent conveyance occurred in this case is a  matter that should be determined by the district court." See id. As we read this language, Craft I directed the district court to  investigate whether the facts ofthis case constituted a fraudulent conveyance under Michigan law. This is exactly what the  district court did. It found that under Michigan law, the August 1989 transfer could not be fraudulent, because Michigan  courts have "consistently held that creditors have no right to complain of a debtor's disposition of exempt [i.e., entireties]  property because such property could not be reached to satisfy debts had it remained in the debtor's hands." See, e.g., Cross  v. Commons, 59 N.W.2d 41, 43 (Mich. 1953) (en banc). The court went on, however, to find that Don's mortgage payments  were fraudulent under an exception to that rule. See McCaslin, 292 N.W. at 699. The court's consideration and application  of Michigan fraudulent conveyance law was in harmony with the scope of the CraftI court's remand, and we reject Sandra's  contention otherwise.

2. Implied Consent

37
Sandra also argues that the district court erred in permitting the IRS to argue its fraudulent enhancement theory upon  remand because she did not consent to trial of the issue. The district court found that Sandra had impliedly consented to  trial of the fraudulent enhancement theory by failing to object to the IRS's claim until after the trial; by consenting to the  Joint Final Pretrial Order, which indicated that the enhancement claim was a controverted issue for trial; and by failing to  object at trial to the government's evidence that Don made payments on behalf of the entireties property from 1979 to 1985,  which "could have been relevant only to the Government's contention that Don's payments into the entireties property from  1979 through 1985 while he was insolvent were fraudulent." Sandra asserts that she objected to the fraudulent enhancement  theory at the final pretrial conference, "an event for which there is unfortunately no recorded transcript," Appellee's Br. at  18, and in her post-trial brief. Sandra also alleges that the fact that the Joint Final Pretrial Order lists among the  "Controverted and Unresolved Issues for Trial" the issue of whether Don made fraudulent conveyances into the tenancy by  the entirety at a time when he was insolvent actually shows that she objected to the issue prior to trial. Sandra further argues  that she did not object to the enhancement theory at trial because the judge had indicated that the trial would be "relaxed,"  and that he had ordered the parties to submit their legal arguments as part of their post-trial briefs rather than present them  at trial. Lastly, Sandra argues that the evidence that the government put on at trial did not necessarily go to the enhancement  issue; thus, her failure to object to it did not imply her consent to try the issue.

38
"Fed. R. Civ. Pro. [sic] 15(b) states that issues tried by the express or implied consent of the parties shall be treated in all  respects as if they had been raised in the pleadings." Carlyle v. United States, 674 F.2d 554, 556 (6th Cir. 1982); see also Fed. R. Civ. P. 15(b). Although the parties agree that this court reviews for clear error the district court's finding that the  IRS was not precluded from raising the fraudulent enhancement issue, we think the better view is that we review for abuse  of discretion the district court's decision regarding whether an issue not raised in the pleadings has been tried by the implied  consent of the parties. See Moncrief v. Williston Basin Interstate Pipeline Co., 174 F.3d 1150, 1160 (10th Cir. 1999); 6A  Wright et al., Federal Practice and Procedure §1493, at 41 (2d ed. 1990).

39
The district court did not abuse its discretion in finding that Sandra impliedly consented to trial of the fraudulent  enhancement theory. First, because the theory of fraudulent enhancement constitutes a well-established exception to  Michigan fraudulent conveyance law, see supra, Sandra was on notice from the time of the government's answer to her  complaint that fraudulent enhancement could be at issue in the case. Further, as the governmentpoints out, although Sandra  agreed that whether the government should prevail on the enhancement theory was a controverted issue for trial, she did not  move to include the question of whether the government could argue the theory as a controverted issue in the Joint Final  Pretrial Order. Finally, although the trial on remand was, in the words of the court, "more casual than a trial sometimes  looks" -- the trial took place with the parties, witnesses, and the judge sitting around a table in the courtroom -- the court  admonished the parties that "it's still a federal court, and all the rules apply." See Carlyle, 674 F.2d at 556 (finding that  where defendant raised defense for first time at trial, and then offered evidence of the defense, defense was argued by  implied consent of the plaintiff for purposes of Rule 15(b)). Cf. Yellow Freight Sys., Inc. v. Martin, 954 F.2d 353, 358 (6th  Cir. 1992).

40
Regardless of whether Sandra objected in a timely fashion to the government's theory, her argument fails because she  cannot show that she has been prejudiced by the district court's decision to permit the IRS to argue the enhancement theory.  Under Rule 15(b), "a district court may consider claims outside of those raised in the pleadings so long as doing so does not  cause prejudice." Cruz v. Coach Stores, Inc., 202 F.3d 560, 569 (2d Cir. 2000); see also 6A Wright et al., §1493, at 36-40  ("Prejudice in this context means a lack of opportunity to prepare to meet the unpleaded issue."). Sandra cannot show that  she suffered prejudice simply because the IRS changed its legal theory. See Cruz, 202 F.3d at 569. "Instead, a party's failure  to plead an issue it later presented must have disadvantaged its opponent in presenting its case." Id. (quotation marks and  citation omitted). Sandra knew of the government's theory prior to trial because the government had argued it in its pre-trial  brief. Further, she argued the issue in her post-trial brief, which the district court considered. She was not prohibited from  cross-examining the government's witnesses on the issue if she so chose, and she does not argue that she needed to discover  additional evidence to defend against the fraudulent enhancement theory. Thus, the government's argument did not  prejudice Sandra, and the issue was tried by her implied consent.

B.

41
Sandra next argues that the district court erred by failing to find that the government's fraudulent enhancement claim  was not barred by the statute of limitations contained in I.R.C. §6502. Sandra asserts no case law in her favor, and her  claim has no merit.

42
We review de novo a district court's determination that a complaint was filed outside the relevant statute of limitations. See Tolbert v. State of Ohio Dep't of Transp., 172 F.3d 934, 938 (6th Cir. 1999). The parties agree that the IRS assessed  Don's federal tax liabilities in July 1988. At that time, §6502 contained a six-year limitations period within which the IRS  could begin collection proceedings on a tax assessment. See I.R.C. §6502(a)(1) (1989). The statute provided that the  limitations period begins to run on the date of the assessment of the tax. See id. Thus, under the statute in effect at the time,  the IRS had until July 1994 to begin collection proceedings against Don. However, Congress amended the statute in 1990  to increase the §6502 limitations period to ten years. See I.R.C. §6502 (Historical and Statutory Notes). The amendment  applied the new ten-year period to taxes already assessed for which the six-year limitations period had not expired. See id. Because Don's tax debts had already been assessed and the six-year limitations period had not run on the IRS's claim, the  ten-year limitations period applied to Don's tax debts. Accordingly, the IRS had until July 1998 to begin collection  proceedings against Don.

43
The government filed its answer to Sandra's complaint in July 1993. Because the government's fraudulent enhancement  claim was tried by implied consent, see supra, its claim must be "treated in all respects as if [it] had been raised in the  pleadings." See Fed. R. Civ. P. 15(b). The claim is thus deemed filed on the date that the IRS filed its answer in July 1993,  well within the ten-year limitations period that began running in July 1988. See id.; Fed. R. Civ. P. 15(c).

C.

44
Sandra argues that Don's death in August 1998 makes moot the IRS's remedy in this case. She claims that the  government stipulated at an early point in the case that its lien attached to proceeds of the sale of the Berwyck Property to  the same extent that the lien attached to the property itself;22 once this court found that the tax lien did not attach to the  property, see Craft I, 140 F.3d at 643-44, the lien attached to nothing and the IRS had nothing to enforce. In the alternative,  Sandra asserts that the Craft I holding requires that the government's lien against the property was unenforceable until  either Don and Sandra died, or until the couple divorced. See Leroy Lane II, 972 F.2d at 138. Under Sandra's theory, the  proceeds of the sale of the entireties property revert to Sandra upon Don's death, and the IRS cannot reach them. These  theories fail.

45
We review questions of mootness de novo. See Comer v. Cisneros, 37 F.3d 775, 787 (2d Cir.1994). By operation of law,  the IRS's lien attached to all of Don's property and rights to property. See I.R.C. §6321. Although this court found that Don  had no individual interest -- present or future -- in the entireties property, see Craft I, 140 F.3d at 643-44, the IRS did not  gain recovery upon a theory that Don had an individual interest in the entireties property. Rather, the district court found  that the IRS could recover the value of mortgage payments Don made on behalf of the entireties property under a fraudulent  enhancement theory. In other words, Don essentially hid funds to which the IRS was entitled (by virtue of its lien) by  investing them in a property to which the lien could not attach. See McCaslin, 292 N.W. at 699; accord Elkins v. Suttorp  (In re Elkins), 94 B.R. 932, 934-35 (Bankr. W.D. Mich. 1988). Thus, Sandra's arguments, which presume that the district  court awarded the IRS proceeds of the sale of the property on the basis that Don had some kind of individual interest in the  Berwyck Property, are misplaced. Rather, the court awarded the IRS's remedy on the basis that Don used his own funds to  enhance the property in order to avoid paying his tax debts.

D.

46
On October 26, 1995, the district court ordered that the government receive $50,293.94 of the escrowed proceeds from  the sale of the Berwyck Property. Subsequent to this court's remand, the district court determined that the government was  entitled to only $6,693 from the escrowed sales proceeds. Sandra argues that, pursuant to 28 U.S.C. §2411, she is entitled  to interest on the $43,600.94 (i.e., $50,293.94 less $6,693) that the government has possessed since October 1995.

Section 2411 provides as follows:

47
In any judgment of any court rendered (whether against the United States, a collector or deputy collector of internal  revenue, a former collector or deputy collector, or the personal representative in case of death) for any overpayment  in respect of any internal-revenue tax, interest shall be allowed at the overpaymentrate established under section  6621 of the Internal Revenue Code of 1986 upon the amount of the overpayment, from the date of the payment or  collection thereof to a date preceding the date of the refund check by not more than thirty days, such date to be  determined by the Commissioner of Internal Revenue.

48
28 U.S.C. §2411. Citing Spawn v. Western Bank-Westheimer, 989 F.2d 830, 834 (5th Cir. 1993), the district court denied  Sandra's motion for an award of interest on the basis that "[§2411] applies only to tax refund cases." The court reasoned  that the statute's use of the terms "overpayment" and "payment" indicates that it was intended to apply only in cases where  the taxpayer has paid a disputed tax liability and then seeks a refund. Because Sandra brought the instant case as an action  to quiet title rather than as a tax refund case, and because the government obtained Sandra's funds pursuant to a court  judgment rather than by virtue of an overpayment or payment of tax obligations, the court rejected Sandra's request for  interest payments. We review de novo the district court's interpretation of §2411. See State of Mich. v. United States, 141  F.3d 662, 664 (6th Cir. 1998).

49
Sandra asserts that § 2411 applies to her case because the funds she will recover constitute an overpayment, and because  she will recover them pursuant to a court judgment. The IRS responds that a plaintiff may not collect interest against the  federal government unless it has specifically waived its sovereign immunity, and § 2411 contains no such waiver for suits  to quiet title. In addition, the IRS argues that the funds Sandra will receive are not an "overpayment" of taxes. See 28  U.S.C. §2411.

50
A plaintiff may not recover interest from the federal government in the absence of an express waiver of its sovereign  immunity from suit. See Library of Congress v. Shaw, 478 U.S. 310, 314 (1986). In determining whether Congress has  expressly waived the government's immunity, a court must "construe waivers strictly in favor of the sovereign, and not  enlarge the waiver beyond what the language requires." Id. at 318 (citations and quotation marks omitted). As the Shaw Court noted, Congress has expressly authorized interest claims against the government in the circumstances described by §  2411. See id. at 318-19 n.6. Because § 2411 authorizes payment of interest based upon "any judgment of any court rendered  . . . for any overpayment in respect of any internal-revenue tax," the question in this case becomes whether the escrowed  $43,600.94 held by the IRS constitutes an "overpayment" with respect to an internal-revenue tax. See 28 U.S.C. § 2411.

51
As did the district court, the government relies on Spawn to suggest that an "overpayment" refers only to tax refunds. See 989 F.2d 830. The Spawn court stated that § 2411 "expressly authorizes awards of prejudgment and postjudgment  interest against the United States in tax refund cases." Id. at 834. But the court made this statement only in passing -- Spawn was not a tax case -- and lifted it directly from the Supreme Court's description of § 2411 in Shaw. See id. (citing Shaw, 478  U.S. at 318-19 n.6). In Shaw, the Supreme Court simply cited § 2411 as one of several examples of Congress expressly  waiving the government's immunity with respect to interest awards, describing § 2411 in a parenthetical as "expressly  authorizing prejudgment and postjudgment interest payable by the United States in tax-refund cases." Shaw, 478 U.S. at  318-19 n.6. This parenthetical description of a statute, contained in a footnote within dicta, is not dispositive of the  meaning of §2411.

52
The language of §2411 is broad. Cf. Jones v. Liberty Glass Co., 332 U.S. 524, 531 (1948). Sandra, however, has not  met her burden of proof on the interest claim. The onlycase she cites in support of her theory is Steiner v. Nelson, 199 F.  Supp. 441 (E.D. Wis. 1961), aff'd, 309 F.2d 19 (7th Cir. 1962). In Steiner, the court held that even where the IRS obtains  funds from a taxpayer based on an illegal tax assessment, the taxpayer is not entitled to interest under § 2411. See 199 F.  Supp. at 441-42. Thus, as the government notes, Steiner actually lends support to its position. Although we are not bound  by the reasoning or result of the Steiner court, we hold that, on the facts of this case, Sandra has failed to carry her burden  of proving her case pursuant to §2411.

E.

53
In June of this year, Sandra filed a motion with this court to recover litigation costs pursuant to either the Equal Access  to Justice Act, 28 U.S.C. §2412, or under Fed. R. App. P. 38. The panel deferred ruling on the motion until oral argument.  In the motion, Sandra argues that the government's appeal simply asserts the same issue, arguments, and case law rejected  by the Craft I panel. Because the government is bound by the law of the case doctrine, Sandra claims its appeal is brought  in bad faith. The government responds that Sandra should be denied costs because it was substantially justified in bringing  its appeal, see I.R.C. § 7430, and because its appeal is not frivolous, as required by Rule 38.

Fed. R. App. P. 38. That rule provides:

54
If a court of appeals determines that an appeal is frivolous, it may after a separately filed motion or notice from the  court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.

55
In Martin v. CIR, this court warned litigants of our "ample authority" to assess double costs and "just damages" against an  appellant in a frivolous appeal: "In future such cases this court will not hesitate to award damages when the appeal is  frivolous, or taken merely for purposes of delay, involving an issue or issues already clearly resolved." 756 F.2d 38, 41 (6th  Cir. 1985) (quotation marks omitted); accord Sisemore v. United States, 797 F.2d 268, 271 (6th Cir. 1986); Wilton Corp. v.  Ashland Castings Corp., 188 F.3d 670, 676 (6th Cir. 1999). Recently, this court concluded that even though an appeal is  not made in "bad faith," an appellee may garner costs if an appeal is "wholly without merit." Wilton Corp., 188 F.3d at 677.  Although the IRS's appeal is precluded by both the law of the case and law of the circuit doctrines, we have acknowledged  that the government raised colorable - if not persuasive -- arguments in its appeal, see supra. Accordingly, we deny  Sandra's motion for costs pursuant to Rule 38.

56
We also deny Sandra's motion for costs pursuant to §2412. Sandra has failed to articulate why she merits costs pursuant  to that statute. Rather, she simply reasserts her argument that the government's appeal is precluded at this time. Further,  certain monetary awards in tax cases may be awarded only pursuant to I.R.C. §7430. See 28 U.S.C. § 2412(e); see also  Sisemore, 797 F.2d at 271. The provisions of § 7430 are "not automatic," and "are limited by a whole host of conditions  and requirements." Beaty v. United States, 937 F.2d 288, 292 (6th Cir. 1991). Sandra has articulated none of these  conditions or requirements, and, indeed, has failed even to discuss whether § 7430 applies to her case. Accordingly, we  reject her motion for costs.23

IV. CONCLUSION

57
For the reasons discussed above, we DISMISS the government's appeal as precluded by both the law of the case and  law of the circuit doctrines. We further AFFIRM the district court's judgment, andDENY Sandra's motion for litigation  costs brought pursuant to Rule 38 and 28 U.S.C. §2412.

Notes:

1
  Craft I contains a detailed factual and procedural background of this case. See 140 F.3d at 639-41.

2
  The court reached the figure by dividing in half the difference between the fair market value of the property as of the  date of the August 1989 transfer ($120,000) and the amount of the outstanding mortgage balance at the time ($19,412.12). See Craft I, 140 F.3d at 641.

3
  The district court also rejected Sandra's theories to bar the government's relief. Sandra raises many of these theories on  appeal, and we discuss them infra.

4
  The IRS was in possession of $50,293.94 of escrowed funds that the district court had awarded it in October 1995.  Sandra was seeking interest on the $43,600.94 that the IRS would be returning to her (i.e., 50,293.94 less $6,693).

5
  The IRS points to General Am. Life Ins. Co. as an example of a case in which this court reconsidered its prior holding  at a later stage in the same case. See 156 F.2d at 618-21. We do not dispute that we have the power to reach a result  different from one reached earlier in the litigation; the government, however, has not met its burden in the instant case of  showing the "extraordinary conditions" that will permit us to do so. See id. at 619.

6
  All of the cases to which the IRS cites for its contention that Cole has been overruled were before the Craft I panel  save Drye v. United States, 120 S. Ct. 474 (1999), which we discuss infra.

7
  Indeed, the Third Circuit has stated that, "in National Bank of Commerce the Supreme Court acknowledged that if  money is held by a husband and wife in a joint bank account as tenants by the entireties under applicable state law 'the  Government could not use the money in the account to satisfy the tax obligations of one spouse.'" Internal Revenue Serv. v.  Gaster, 42 F.3d 787, 791 (3d Cir. 1994) (citing National Bank of Commerce, 472 U.S. at 729 n.11) (internal footnote  omitted; emphasis added).

8
  Nor do Cole and Craft I stand alone. As the Craft I panel noted, this court reiterated the rule of Cole in subsequent  cases. See 140 F.3d at 642 (citing United States v. Certain Real Property Located at 2525 Leroy Lane ("Leroy Lane I"),  910 F.2d 343, 351 (6th Cir. 1990)); id. (citing United States v. Certain Real Property Located at 2525 Leroy Lane ("Leroy  Lane II"), 972 F.2d 136, 138 (6th Cir. 1992)); see also Gaster, 42 F.3d at 791 n.3, 793 (holding that IRS may not levy  against bank account of delinquent taxpayer held in tenancy by the entirety where taxpayer did not have unilateral right to  withdraw funds).

9
  As the concurrence acknowledges, the law-of-the-circuit doctrine prohibits a subsequent panel of this court from  revisiting an earlier panel's decision when there has not been a change in the substantive law or an intervening Supreme  Court decision. Inasmuch as the rule of Cole v. Cardoza remained good law, the Craft I panel was bound to follow it.

10
  Because the third exception to the law of the case doctrine requires a finding that a prior decision was both clearly  erroneous and that it would work a manifest injustice, see Hanover Ins. Co., 105 F.3d at 312, our holding that Craft I is not  clearly erroneous makes it unnecessary for us to address the question of whether that decision will work a manifest  injustice.

11
  I.R.C. §6321 provides:  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.

12
  This precise nature of this rule appears to have wavered over time. Compare Aquilino v. United States, 363 U.S. 509,  514 (1960) (discussing the "application of state law in ascertaining the taxpayer's property rights" in determining whether  property is subject to federal tax lien) with National Bank of Commerce, 472 U.S. at 727. Regardless of which formulation  of the rule is adopted, the key point is that the federal question -- i.e., whether a state-law right constitutes "property" or  "rights to property" under the statute -- cannot be considered independently from the state-law question -- i.e., what is the  nature and extent of the state-law right. When, as in this case, state law provides that there can be no individual interest in  property held in a tenancy by the entireties, there is nothing which can be deemed "property" or "rights to property" under  federal law. This understanding of § 6321 does not reflect a failure on the part of the Craft I majority to put substance over  form, as the concurrence charges, but rather comports with the long-established principle that "federal law creates no  property rights but merely attaches consequences . . . to rights created under state law." Bess, 357 U.S. at 55 (1958).

13
  The IRS attacks the court's statement that, "state law governs the issue of whether any property interests exist in the  first place," Craft I, 140 F.3d at 643 (citing Rodgers, 461 U.S. at 683), as being inconsistent with Drye. As did the Supreme  Court in Drye, we note that, upon careful review, some of the language we used in Craft I was not "phrased so  meticulously" as we would have liked. See Drye, 120 S.Ct. at 481. We do not, however, read the sentence of which the IRS  complains nor the approach taken in Craft I to be inconsistent with the analytic approach taken by the Drye Court: that state  law determines the rights a taxpayer has in property and federal law determines whether those rights constitute "property"  or "rights to property" pursuant to §6321. See Drye, 120 S. Ct. at 481.

14
  In his separate concurrence, Judge Gilman cites to Rogers v. Rogers, 356 N.W.2d 288, 293 (Mich. Ct. App. 1984), to  support the proposition that Don Craft possessed a contingent future interest in the Berwyck Property. Although the Rogers court did acknowledge that each spouse "is entitled to the enjoyment of the entirety and to survivorship," it emphasized that  "neither the husband nor the wife has an individual, separate interest in entireties property, and neither has an interest in  such property which may be conveyed, encumbered or alienated without the consent of the other." Rogers is thus consistent  with Michigan Supreme Court's refusal to recognize a severable future interest held by one spouse in an entireties property. See Sanford v. Bertrau, 204 Mich. 244, 169 N.W. 880, 881 (1918). Moreover, to the extent that Rogers can be construed as  being inconsistent with Sanford (which we believe it cannot), Sanford remains good law and is thus the controlling rule of  decision.

15
  In the instant case, Don Craft's expectancy of inheritance never ripened into a present estate. Indeed, Don predeceased  Sandra.

16
  This is significant because the only interest which any member of the Craft I panel concluded might be subject to a  federal tax lien was a future interest. Compare140 F.3d at 644 with id. at 646 (Ryan, J., concurring).

17
  The concurrence criticizes the court for "going too far" in characterizing the IRS's argument in these terms. However,  IRS counsel expressly endorsed this reading of the Drye decision during oral argument.

18
  In his concurrence, Judge Gilman twice "recommend[s] that this case be revisited en banc." There is a clearly  delineated procedure under the Federal Rules for a party to seek review of a matter en banc. See Fed. R. App. P. 35(b). The  government is obviously aware of this procedure in that it previously filed a petition for en banc review of Craft I, although  its petition did not garner a single vote. Moreover, this court's published Internal Operating Procedures provide that any  active judge of this court may request, sua sponte, a request for a poll for rehearing on banc, even in the absence of a  petition from a party. See 6 Cir. I.O.P. 35(c). We think it appropriate to reserve any discussion of whether this case should  be reheard en banc as a part of the process contemplated by the aforementioned rules.

19
  All of the IRS's arguments on appeal require us to reject the holding of Craft I. Since we are unable to do that for the  reasons discussed above, we DISMISS the government's appeal.

20
  On appeal, the government argues only that the mortgage payments -- and not the property tax payments -- constituted  a fraudulent enhancement of the property.

21
  The IRS had raised the fraudulent conveyance argument as a defense in its answer to Sandra's complaint.

22
  The government disputes the stipulation to which Sandra refers, arguing that it agreed to release of the proceeds upon  "resolution of the tax lien dispute." The exact nature of the stipulation is not clear from the record, but that does not impede  our resolution of the issue. See infra.

23
  The motion also sought dismissal of the government's appeal. We DENY Sandra's motion in its entirety.

58
RONALD LEE GILMAN, Circuit Judge, concurring in the judgment.

59
Because I agree that we are bound by Craft I for  the reasons that are well stated in the court's opinion, I concur in the judgment. I also fully concur in the court's disposition  of Sandra Craft's cross-appeal. Nevertheless, I believe that the result reached in Craft I, and that this court endorses today,  is inconsistent with Supreme Court precedent and should be reversed. I therefore write separately to identify the bases for  my disagreement with Craft I and to recommend that this case be revisited en banc.

60
As Judge Ryan pointed out in his dissent in Craft I, the legal landscape has changed considerably since 1971, when this  court held in Cole v. Cardoza, 441 F.2d 1337, 1343 (6th Cir. 1971), that a federal tax lien against an individual taxpayer  cannot attach to property held by that taxpayer as a tenant by the entirety. In the interim, the Supreme Court has made clear  that the IRS's power under 26 U.S.C. §6321 to attach the individual property rights of a delinquent taxpayer is extensive, if  not plenary. See United States v. National Bank of Commerce, 472 U.S. 713, 719-20 (1985) (holding that § 6321 "is broad  and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have"); Jewett v.  Commissioner of Internal Revenue, 455 U.S. 305, 309 (1982) (concluding that Congress intended federal tax liens to attach  to "every species of right or interest protected by law and having an exchangeable value" (citation and internal quotation  marks omitted)). Although state property law determines what rights to property a person enjoys, federal law dictates  whether a tax lien may attach to those rights. See National Bank of Commerce, 472 U.S. at 722, 727.

61
In the years since Cole, the Supreme Court has held that state law "legal fictions" will be ignored insofar as the federal  tax laws are concerned. See United States v. Irvine, 511 U.S. 224, 240 (1994). The Irvine Court considered whether the  federal gift tax applied to a transfer that occurred when a mother disclaimed her interest in a trust, thereby allowing that  interest to pass to her children. Upon the termination of a trust established by her grandfather, Sally Irvine became entitled  to a share of the trust principal. She disclaimed part of her share, effectively transferring that part to her children. Under  Minnesota law, "an effective disclaimer of a testamentary gift is generally treated as relating back to the moment of the  original transfer of the interest being disclaimed, having the effect of canceling the transfer to the disclaimant ab initio and  substituting a single transfer from the original donor to the beneficiary of the disclaimer." Id. at 239. Thus, the share that  Irvine's children received was considered by Minnesota law as if it had never been possessed by Irvine, but rather as if it  had been transferred directly from the trust to Irvine's children.

62
Nevertheless, the Supreme Court held that Irvine's disclaimer in favor of her children was taxable, declaring that "the  federal gift tax is not struck blind by a disclaimer." Id. at 240. In other words, for federal tax purposes, the key inquiry is  what rights an individual actually possesses under state law, not how the state characterizes those rights. See id.; see also  Drye v. United States, 120 S. Ct. 474, 482 n.5 (1999) ("[I]t is not material that the economic benefit to which the  [taxpayer's local law property] right pertains is not characterized as 'property' by local law." (quoting W. Plumb, Federal  Tax Liens 27 (3d ed. 1972) (alterations in original))).

63
The appropriate inquiry, then, as stated by Judge Ryan in Craft I, is "what state-definedrights, if any, did Don Craft  have in the Berwyck property?" Craft I, 140 F.3d 638, 645 (Ryan, J., concurring). First, Don Craft had the right to enter and  enjoy the property to the exclusion of all others, except for Sandra Craft. See Mich. Comp. Laws §557.71. If the Crafts had  decided to rent or sell the property, Don Craft would have received half of the proceeds. See id. He further possessed a  contingent future interest, because he would have taken the entire estate in fee simple if Sandra had predeceased him. See  Rogers v. Rogers, 356 N.W.2d 288, 293 (Mich. Ct. App. 1984) ("[E]ach spouse is considered to own the whole and,  therefore, is entitled to the enjoyment of the entirety and to survivorship."). Finally, if the Crafts had divorced, they would  have become tenants in common, and Don Craft would have had the right to bring an action for partition and sale. See Mich. Comp. Laws §552.102.

64
The fact that Don Craft could not have independently sold his share in the tenancy by the entirety does not alter the fact  that his rights to the property had value. "Under the great weight of federal authority,... such restraints on alienation are  not effective to prevent a federal tax lien from attaching under 26 U.S.C. §6321." Bank One Ohio Trust Co. v. United  States, 80 F.3d 173, 176 (6th Cir. 1996).

65
The majority in Craft I was aware of these rights, and acknowledged that "a federal tax lien can attach to a future or  contingent interest in property." Craft I, 140 F.3d at 644. Craft I rejected the IRS's claim, however, on the ground that "state  law determines the nature of the legal interest which a taxpayer has in a property," and "[i]n Michigan, it is well established  that one spouse does not possess a separate interest in an entireties property." Craft I, 140 F.3d at 643-44.

66
I believe that the Craft I majority committed a subtle but critical error in accepting at face value Michigan's description of the property interests held by a tenant by the entirety, rather than looking past that description to the actual substance of  those interests under Michigan law. In Irvine, the Supreme Court acknowledged that, under Minnesota law, a disclaimant is  considered as if she never held any interest in the property whatsoever. Irvine, 511 U.S. at 239. Nevertheless, the Court  looked past Minnesota's characterization of Irvine's property interest and held that the gift tax could attach because, in  actuality, Irvine exercised control over the disposition of the property--a right that had unquestionable value. Id. at 240.

67
In contravention of Irvine, the majority in Craft I failed to look past Michigan's characterization of an individual's  interest in entireties property and ignored the substantial rights actually held by Don Craft, which similarly had undeniable  value. In other words, I believe that the majority in Craft I was "struck blind" by Michigan's "legal fictions."

68
To my mind, then, Craft I reached the wrong result, and the IRS ought to have had the right to attach Don Craft's  valuable interest in the tenancy by the entirety. Nevertheless, two related doctrines require that I concur with the result  reached by the court. The first is the law-of-the-case doctrine, which provides that "[a]n earlier appellate court's decision [in  the same case] as to a particular issue may not be revisited unless 'substantially new evidence has been introduced,... there  has been an intervening change of law, or ... the first decision was clearly erroneous and enforcement of its command  would work substantial injustice.'" United States v. Corrado, 227 F.3d 528, 533 (6th Cir. 2000) (citation omitted). Second,  the law-of-the-circuit doctrine provides that, absent an intervening change in the law, "a panel of this court may not  overrule a previous panel's decision." Meeks v. Illinois Cent. Gulf R.R., 738 F.2d 748, 751 (6th Cir. 1984).

69
Craft I is both the law of this case and the law of the circuit. Without delvinginto the precise differences between the  two, suffice it to say that the law-of-the-circuit is the stronger of the two doctrines, and therefore provides the relevant test  for whether Craft I can be revisited by this panel. See LaShawn v. Barry, 87 F.3d 1389, 1395 (D.C. Cir. 1996) ("While the  law-of-the-case doctrine offers several exceptions... the law-of-the-circuit doctrine is much more exacting."). Under the  law-of-the-circuit doctrine, a subsequent panel can only revisit an earlier panel's decision if there has been "a change in the  substantive law or an intervening Supreme Court decision." Smith v. U.S. Postal Service, 766 F.2d 205, 207 (6th Cir.  1985). There has been no substantive change since Craft I to the relevant provisions of either Michigan property law or  federal tax law.

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The IRS argues, however, that the case of Drye v. United States, 120 S. Ct. 474 (1999), decided after Craft I, is a  contrary, intervening Supreme Court decision. In that case, a delinquent taxpayer who was subject to a federal tax lien  disclaimed any interest in his mother's estate after her death, causing the estate to pass to his daughter. Under the relevant  state law, "such a disclaimer creates the legal fiction that the disclaimant predeceased the decedent," with the consequence  that "[t]he disavowing heir's creditors... may not reach property thus disclaimed." Id. at 476. Nevertheless, the Supreme  Court relied on Irvine and disregarded the legal fiction, holding that the taxpayer's interest in his mother's estate was a  "right to property" subject to the federal tax lien.

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Sandra Craft responds that Drye does not represent a change in the law, but is simply a reaffirmation and application of  prior cases in this area. I agree. To the extent that Drye is inconsistent with Craft I--and I believe that it is--that  inconsistency was considered, and rejected, by this court in Craft I in its discussion of Irvine and National Bank of  Commerce. Although the IRS is technically correct that Drye is a "subsequent, contrary view of the law by a controlling  authority," this formulation is incomplete. The purpose of the intervening-controlling-authority exception is to allow a  subsequent panel of this court to respond to a new precedent, unavailable to the prior panel, not just a new decision.  Otherwise, a loophole would exist under which a subsequent panel could freely revisit a decided issue simply by  referencing a later Supreme Court decision that does nothing more than restate the existing precedent. "Were matters  otherwise, the finality of our appellate decisions would yield to constant conflicts within the circuit." LaShawn, 87 F.3d at  1395 (examining the law-of-the-circuit doctrine).

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I disagree, however, with the court's conclusion in PartII.A.2. that "Craft I is essentially consistent with the Drye Court's reasoning." Op. at 11. The court also asserts that "under Michigan law, Don had no individual interest in the  entireties property." Op. at 14. I do not believe that this statement squares with either reality or with Michigan law. As  discussed above, Don Craft in fact possessed at the very least a contingent future interest under Michigan law and would  have taken the entire estate in fee simple had he survived Sandra. See Rogers v. Rogers, 356 N.W.2d 288, 293 (Mich. Ct.  App. 1984).

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Furthermore, the court goes too far when it suggests that the IRS is arguing that "Drye stands for the proposition that a  federal tax lien attaches to any right to inherit property, no matter how remote." Op. at 16. A key distinction between a  tenancy by the entirety and a contingent expectancy is the latter's revocability. Although a hoped-for inheritance could be  subject to the whims of an ailing, fickle relative, the rights associated with an entireties property are clearly irrevocable.  Such was the case with the Berwyck property.

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In sum, I believe that we are bound by the holding of CraftI, and I therefore concur in the result reached by the court. But I also believe that Craft I contravenes recent Supreme Court decisions and would therefore recommend that this case  be revisited en banc