Court Opinion

ID: 4166885
Source: CourtListenerOpinion
Date Created: 2017-05-08 17:05:01.050212+00
Date Added: 2024-06-11T07:46:57.751888
License: Public Domain

PRECEDENTIAL
      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                _____________

      Nos. 14-4237, 15-1247, 15-3433 & 15-3469
                   _____________

          UNITED STATES OF AMERICA,
                         Appellant in 14-4237, 15-
                           1247 & 15-3433

                          v.

   GARY S. CARDACI; BEVERLY M. CARDACI;
       ED WOOD CUSTOM DRYWALL, INC.;
LEWIS J. MOREY; TRI-COUNTY BUILDING SUPPLIES,
            INC.; BRANDI L. WATSON

            Gary S. Cardaci; Beverly M. Cardaci,
                             Appellants in 15-3469
                 _______________

    On Appeal from the United States District Court
             for the District of New Jersey
        (D.C. Civil Action No. 1-12-cv-05402)
       District Judge: Hon. Jerome B. Simandle
                   _______________

                      Argued
                  November 3, 2016
 Before: JORDAN, GREENAWAY, JR., and RENDELL,
                  Circuit Judges.

               (Opinion Filed: May 8, 2017)
                    _______________

Julie C. Avetta [ARGUED]
Michael J. Haungs
Curtis C. Pett
United States Department of Justice
  Tax Division
950 Pennsylvania Avenue, N.W.
P.O. Box 502
Washington, DC 20044
       Counsel for Appellant

Anthony P. Monzo [ARGUED]
Monzo Catanese Hillegass
211 Bayberry Drive
Suite 2A
Cape May, NJ 08210
      Counsel for Appellees
                    _______________

                OPINION OF THE COURT
                    _______________

JORDAN, Circuit Judge.

       The government has been trying to collect unpaid
taxes assessed against Gary S. Cardaci, and, to that end, it
sought the judicial sale of the home he owns in New Jersey
with his wife, Beverly. The United States District Court for

                             2
the District of New Jersey concluded that a forced sale would
be inequitable and instead ordered that Mr. Cardaci make
monthly rent payments to the government. Unhappy with
that outcome, the government has appealed. The Cardacis,
who should have been delighted with the decision, have filed
a cross appeal to challenge both the requirement to pay rent
and the monthly rental amount. Even though no sale was
ordered, the Cardacis also question the authority of the
District Court to order a sale. We confirm the District
Court’s authority to consider whether the Cardacis’ property
should be subject to a forced sale but will vacate and remand
for recalculation of Mr. and Mrs. Cardacis’ respective
interests in the property and reconsideration of the equitable
factors weighing for and against a sale.1
I.     BACKGROUND

      A.     Factual Background

      Mr. Cardaci was the owner of Holly Beach
Construction Company (“Holly Beach” or “the Company”).

      1
          Because we remand for the District Court to consider
again whether to order a sale of the property, we do not
address in detail the decision to order rental payments. We
note, however, that Federal Rule of Civil Procedure 54(c)
instructs that a “final judgment should grant the relief to
which each party is entitled, even if the party has not
demanded that relief in its pleadings.” Therefore, on remand,
the District Court is not precluded from considering the
imposition of rental payments as an alternative remedy
simply because the government “has not demanded that relief
in its pleadings.” Id.

                              3
In 2000 and 2001, the business began to fail, and, in an effort
to shore it up, Mr. Cardaci used approximately $49,600 in
taxes withheld from the wages of his employees to pay
suppliers and wages rather than payroll taxes. During that
two-year period, Mr. Cardaci took approximately $20,000 in
salary from Holly Beach. He used that income to support his
family, including making mortgage payments and paying
private school tuition for one of his sons.

        The Company eventually folded and Mr. Cardaci tried
unsuccessfully to start other businesses. He has not had a
regular income since 2009. On top of those financial
frustrations, he also has medical problems that limit his
employment options. Since 2005, Beverly Cardaci has been
the primary wage earner in the family. She earns about
$62,000 a year as a public school teacher.

       The Cardacis own property in Cape May County, New
Jersey, that they purchased in 1978 as their home. They
claim no dependents now, but two of their adult children live
in the house with them at least part of each year. Their son
Garrett lives there full time with his wife and three children.
Garrett earns approximately $37,600 a year. He emerged
from bankruptcy a year and a half before the bench trial in
this case. He and his wife do not pay rent. Another son,
Robert, lives in the house during the summer while he does
seasonal work. He earns just under $4,000 a year.

       The Cardacis’ house has been their marital domicile
continuously since they bought it, and the only mortgage on
the property was paid in full in 2009. Mr. Cardaci made the
majority of the monthly mortgage payments from 1978
through 2005, but, after that, Mrs. Cardaci was the sole payor.

                              4
The District Court determined that the house has a fair market
value of $150,500. If the house were put to a forced sale, the
government would set the minimum bid at 60 percent of the
assessed value, which is $90,300.

       At the time of the District Court’s order, Mr. Cardaci
was fifty-eight and Mrs. Cardaci was sixty-two. Neither party
submitted evidence of the Cardacis’ life expectancies, so the
District Court, using the Social Security Administration’s
Actuarial Life Table, calculated the expectancies on the
assumption that they were the same.

      B.     Procedural Background

       In August 2012, the government brought this action to
reduce to judgment federal tax assessments against
Mr. Cardaci and to force the sale of the Cardaci home.2 It
sought to collect half of the proceeds to pay for Mr. Cardaci’s
tax liability and to distribute the remainder to Mrs. Cardaci.
Upon the government’s motion for summary judgment, the
District Court, recognizing that Mr. Cardaci owed $80,083.87
plus interest and that the government had a valid lien on the
Cardaci property, granted partial summary judgment to that
effect. The Court also held that the suit was timely because
an assessment was first made in 2002, and the suit was

      2
         The IRS also sought to recover back taxes from
Mr. Cardaci’s partner, Lewis J. Morey, and, in addition, it
sued a drywall company and a building supply company that
might have had an interest in the Cardaci property. Neither of
those two companies, nor Mr. Morey, appeared before the
District Court, and default judgments were entered against
them.

                              5
brought within 10 years of that assessment. The Court did
not, however, grant summary judgment with regard to the
request to foreclose on the property.

        Instead, the District Court determined that it had
“limited discretion” to order an alternative remedy instead of
a foreclosure sale. United States v. Cardaci, No. CIV. 12-
5402 (JBS), 2014 WL 7524981, at *6 (D.N.J. Aug. 21, 2014).
It noted that federal law does authorize such a sale and that
New Jersey state law treats marital property as at least
occasionally subject to partition, so the Court recognized that
it could order a sale of the property, despite Mrs. Cardaci’s
interest in the property and her objection to foreclosure. But
it decided that additional factual development at a trial would
be needed before it could properly weigh the equities and
determine whether foreclosure was proper.

       After a two-day bench trial, the Court issued a
judgment based on its consideration of the equitable factors
set out in the Supreme Court’s decision in United States v.
Rodgers, 461 U.S. 677, 710-11 (1983). The District Court
examined: (1) “the extent to which the [g]overnment’s
financial interests would be prejudiced if it were relegated to
a forced sale of the partial interest actually liable for the
delinquent taxes;” (2) whether Mrs. Cardaci had “a legally
recognized expectation that [the] separate property would not
be subject to forced sale by the delinquent taxpayer or his or
her creditors;” (3) the likely prejudice to Mrs. Cardaci “in
personal      dislocation    costs     and     …       practical
undercompensation;” and (4) “the relative character and value
of the non-liable and liable interests held in the property[.]”
Rodgers, 461 U.S. at 710-11. It also considered additional
equitable factors such as the impact a forced sale would have

                               6
on other non-liable parties. Ultimately, the Court concluded
that it would be inequitable to force the sale of the property.

        That conclusion was based in some measure on the
Court’s method of valuing Mr. and Mrs. Cardacis’ respective
interests in their home. In calculating those interests, the
Court refused to find them equal. It determined that Mrs.
Cardaci’s interest in the property, in the event of a forced
sale, would be eighty-six percent, because she “owns an
undivided one-half interest in the whole of the property, plus
a right of survivorship.” Cardaci, 2014 WL 7524981, at *9.
Using life estate interest tables published by the Health Care
Financing Administration in the New Jersey Medicaid
Manual, the Court decided that Mrs. Cardaci’s life estate
interest was worth approximately seventy-two percent of the
value of her interest in the property. The Court then added
that life estate value (seventy-two percent times the fifty
percent value of her interest, to equal thirty-six percent of the
value of the property) to her one-half survivorship interest
and concluded that she had an eighty-six percent interest in
the value of the property, leaving the government to recover
only fourteen percent of the proceeds from a forced sale.3
Based on that calculation and consideration of the equitable
factors from Rodgers, the Court found that “[t]he equities of
this case warrant the exercise of the Court’s ‘very limited
discretion not to order a sale.’” Id. at *17 (citation omitted).
It therefore fixed an imputed monthly rental value of $1,500

       3
          There are problems with the District Court’s
calculations that we describe infra at n.8 and accompanying
text.

                               7
for the property and ordered Mr. Cardaci to pay half of that
value to the IRS each month.4

       Shortly after the final judgment was entered, the
Cardacis filed a motion for reconsideration under Fed. R. Civ.
P. 59(e). They argued that the imputed rental value was
inaccurate and, in support, submitted declarations from two
different realtors. Concluding that such evidence should have
been presented at trial, the District Court refused to
reconsider its original judgment.

       Mr. Cardaci quickly defaulted on his monthly payment
obligation. He also failed to set up an automatic debit
payment system as required by the District Court, and he
failed to provide proof of homeowner’s insurance up to the
balance of the tax obligation, as likewise required. He has not
made any of the required payments and has not sought a stay
of execution of judgment during the pendency of this appeal.

      4
          The IRS also sought an equitable lien on the entire
property to remain attached in case Mr. Cardaci predeceases
Mrs. Cardaci. The Court refused to grant such a lien,
concluding that the tax obligation would no longer attach to
the property upon Mr. Cardaci’s death. To the extent the
government seeks to challenge that decision on appeal, we
note that, when a delinquent-taxpayer spouse dies, a federal
tax lien on property held in a tenancy by the entirety by a
husband and wife is extinguished and “the surviving non-
liable spouse takes the property unencumbered by the federal
tax lien.” Internal Revenue Serv., Notice 2003-60, Collection
Issues Related to Entireties Property (2003), 2003 WL
22100950 (2003).

                              8
       The government filed a timely notice of appeal, as did
the Cardacis.5

II.   DISCUSSION6

      A.     Authority of the District Court to Order a
             Sale

       At the outset, we address the Cardacis’ argument that
the District Court lacked the authority to even consider
ordering a sale of marital property held in tenancy by the
entirety. It is undisputed that, under New Jersey law, that is
the character of the Cardacis’ ownership interest. It seems

      5
         The government initially filed a notice of appeal
before the District Court judgment became final, which was
docketed as No. 14-4237. After the District Court entered a
final judgment as to the Cardacis, the government again
appealed, and that appeal was docketed as No. 15-1247.
Although the judgment was final as to the Cardacis, it did not
resolve all claims against all parties because Mr. Cardaci’s
business partner, Mr. Morey, remained. (See supra n.2.)
Default judgment was entered against him on August 13,
2015, which resolved all remaining claims as to all parties.
The United States and the Cardacis each filed a timely notice
of appeal from that final judgment, Case Nos. 15-3433 and
15-3469, respectively.      All four appeals have been
consolidated.
      6
          The District Court had jurisdiction under 26 U.S.C.
§ 7402 and 28 U.S.C. §§ 1331, 1340 and 1345. We have
jurisdiction pursuant to 28 U.S.C. § 1291.

                              9
obvious, then, that they have rights that qualify as “property”
subject to the federal tax lien statute, 26 U.S.C. § 6321. But
the Cardacis argue that their property is not subject to a
foreclosure sale because it is protected by a New Jersey
statute, N.J.S.A. § 46:3-17.4.

        There are at least two flaws with their argument. First,
that particular New Jersey statute is not applicable to the
Cardacis. It was updated nearly thirty years ago by an
amendment effective January 5, 1988, that includes the
following language: “This act shall take effect on the 90th
day after enactment and shall be applicable to all tenancies by
entireties which are created on or after the effective date of
this act.” 1987 N.J. Laws 1661. Therefore, by its terms, the
statute applies only to tenancies by the entirety created on or
after April 4, 1988. The Cardacis purchased the property at
issue in 1978. Thus, the amended and more protective
version of the New Jersey statute does not apply, and we are
required to “consider the present matter under common-law
principles without reference to N.J.S.A. 46:3-17.4.” Freda v.
Commercial Tr. Co. of N.J., 570 A.2d 409, 411 (N.J. 1990).

       The second and more fundamental flaw in the
Cardacis’ argument is that, regardless of the applicability of
New Jersey statutory or common law, state law must give
way to the supremacy of federal law. In United States v.
Craft, 535 U.S. 274 (2002), the Supreme Court made clear
that “[s]tate law determines only which sticks are in a
person’s bundle [of property rights]. Whether those sticks
qualify as ‘property’ for purposes of the federal tax lien
statute is a question of federal law.” Craft, 535 U.S. at 278-
79. Under federal law, an “interest in … entireties property
constitute[s] ‘property’ or ‘rights to property’ for the purposes

                               10
of the federal tax lien statute.” Id. at 288. State-created
exemptions are swept aside by the Supremacy Clause of the
Constitution, which “is as potent in its application to innocent
bystanders as in its application to delinquent debtors.”
Rodgers, 461 U.S. at 701. Therefore, the District Court was
correct to hold that the marital home constitutes “property”
subject to the federal tax lien statute. Craft, 535 U.S. at 288;
see also Popky v. United States, 419 F.3d 242, 244 (3d Cir.
2005) (holding that rights to marital property are “property”
for federal tax purposes when they include “the right to use
the property, to receive income produced by it, and to exclude
others from it” (quoting Craft, 535 U.S. at 283)).

       B. Analysis of the Rodgers Factors

        Since the Cardacis’ marital home is fair game under
federal tax law, it can indeed be disposed of by a forced sale
under 26 U.S.C. § 7403(c). But that statutory subsection
provides that a court “may decree a sale of such property,” the
word “may” necessarily implying a degree of discretion. 26
U.S.C. § 7403(c) (emphasis added). In United States v.
Rodgers, the Supreme Court said as much, concluding “that
§ 7403 does not require a district court to authorize a forced
sale under absolutely all circumstances, and that some limited
room is left in the statute for the exercise of reasoned
discretion.” 461 U.S. at 706. Rodgers directs that courts
must order a sale of the property to satisfy a tax lien, unless,
in light of common sense or special circumstances, it
determines that a sale would be inequitable. Id. at 711. That
determination is to be guided by four non-exhaustive factors.
Id. at 710-11.

                              11
        “First, a court should consider the extent to which the
[g]overnment’s financial interests would be prejudiced if it
were relegated to a forced sale of the partial interest actually
liable for the delinquent taxes.” Id. at 710. “Second, a court
should consider whether the third party with a non-liable
separate interest in the property would, in the normal course
of events (leaving aside § 7403 and eminent domain
proceedings, of course), have a legally recognized expectation
that that separate property would not be subject to forced sale
by the delinquent taxpayer or his or her creditors.” Id. at 710-
711. “Third, a court should consider the likely prejudice to
the third party, both in personal dislocation costs and in . . .
practical undercompensation[.]” Id. at 711. “Fourth, a court
should consider the relative character and value of the non-
liable and liable interests held in the property[.]” Id. Those
factors come with the caution that, because they do not
“constitute an exhaustive list,” they should not “be used as a
‘mechanical checklist’ to the exclusion of common sense and
consideration of special circumstances.” Id. At the same
time, however, “the limited discretion accorded by § 7403
should be exercised rigorously and sparingly, keeping in mind
the [g]overnment’s paramount interest in prompt and certain
collection of delinquent taxes.” Id.

        The government argues that the District Court here
abused its discretion in analyzing the Rodgers factors and
then erred in concluding that the Cardacis’ home should not
be sold. We agree that the District Court erred in its analysis
of the Rodgers factors but will decline the government’s
invitation to definitively reweigh the factors ourselves, and,
instead, we will remand for the District Court to recalculate
the Cardacis’ property interests and again engage in a
thorough analysis of the equitable factors set forth in

                              12
Rodgers. To assist in that process, we make the following
observations.7

              1. The Prejudice to the Government Resulting
                 from a Partial Sale

        The first Rodgers factor directs a court to “consider the
extent to which the [g]overnment’s financial interests would
be prejudiced if it were relegated to a forced sale of the partial
interest actually liable for the delinquent taxes.” Id. at 710.
In this case, the District Court concluded that that factor
weighed in the government’s favor “only slightly” because a
sale of Mr. Cardaci’s interest would provide little value, while
requiring Mr. Cardaci to pay rental payments to the
government was “likely to produce much greater collection of
taxes to the [g]overnment compared with the amount likely to
be obtained from a foreclosure sale of [the] entire property.”
Cardaci, 2014 WL 7524981, at *9. We agree with that
evaluation of what might be gained by trying to sell
Mr. Cardaci’s interest in the home, but taking into account
what might be gained from rental payments was not a sound
approach in considering this factor. The focus should solely
be on determining whether the government would be
adequately compensated by a partial sale of the taxpayer’s
interest or whether a sale of the entire property is necessary to
vindicate the government’s interest. Rental payments are not

       7
         In explaining the implementation of the factors, we
suggest how some of them may be assessed, but we do not
consider them together to determine the result of a weighing
of the equities. In other words, we have high confidence in
the District Court and are not ruling on how the weighing
process should ultimately come out.

                               13
the equivalent of a partial sale and are not relevant to the
contrast between a partial and a total sale.

       An analysis of the first factor boils down to the idea
that, “the higher the expected market price [of a partial
interest], the less the prejudice, and the less weighty the
[g]overnment’s interest in going ahead with a sale of the
entire property.” Rodgers, 461 U.S. at 710. When there is no
market for a partial interest in the property, this factor will
weigh significantly in favor of a forced sale. See id. Because
there is no real market for one spouse’s interest in a marital
home held in a tenancy by the entirety (the sale of which
would leave the purchaser as a tenant in common with the
remaining spouse), this factor weighs in favor of a forced sale
of the Cardaci home.

             2. The Non-Liable Party’s Legally Recognized
                Expectation in the Property

        The second factor directs a court to “consider whether
the third party with a non-liable separate interest in the
property would, in the normal course of events[,] . . . have a
legally recognized expectation that that separate property
would not be subject to forced sale by the delinquent taxpayer
or his or her creditors.” Id. 710-11. Consideration of that
expectation requires reference to the protections afforded by
state law. See id. at 711 (looking to the protections afforded
by Texas homestead laws). The District Court found that,
because New Jersey law provides special protection for a
spouse’s interest in marital property, Mrs. Cardaci would
have expected that her property would be free from
foreclosure based on her husband’s tax obligations.
According to the government, however, when the District

                              14
Court looked to New Jersey state law, it relied upon a statute
that is “facially inapplicable” and “gave short shrift to the
unusually weak protections provided by the New Jersey
tenancy by the entirety[.]” (Opening Br. at 56.)

        In determining the effect of New Jersey law on
Mrs. Cardaci’s expectations, the Court relied, in part, on
§ 46:3-17.4 of New Jersey’s statutory code. But, as already
noted, that law is only applicable to “tenancies by entireties
which are created on or after the effective date of th[e] act[,]”
namely January 5, 1988. 1987 N.J. Laws 1661. The
Cardacis’ property was purchased ten years earlier, in 1978.
Therefore, the government is correct that § 46:3-17.4 is
inapplicable and, on remand, the District Court should
“consider the present matter under common-law principles
without reference to [it].” Freda, 570 A.2d at 411.
        The government also takes issue with what it
characterizes as the District Court’s failure to recognize that
New Jersey provides weak protections for marital property
held in a tenancy by the entirety. The expectation of the non-
liable spouse is a matter of degree, because state laws afford
varying levels of protection. Rodgers, 461 U.S. at 711. In
Freda v. Commercial Trust Co. of New Jersey, the New
Jersey Supreme Court declined to follow precedent from
Pennsylvania, Florida, and Georgia because the protections
for non-liable spouses under New Jersey common law are not
as strong. 570 A.2d at 413. Unlike in those states, spouses in
New Jersey own separate interests that can be reached by
their individual creditors, so that “the interest of one tenant by
the entirety is subject to liens on that tenant’s interest.” Id.
Nonetheless, the Freda court also recognized that
“[t]enancies by the entirety … survive as a means of
protecting marital assets during coverture and as security for

                               15
one spouse on the death of the other,” and such protection “is
particularly compelling when the asset is the family home.”
Id. at 414 (citation omitted).

       The most recent case from the New Jersey Supreme
Court addressing common law rights and the protection of a
person’s property from a spouse’s creditors – although
rendered in the context of partition – seemed to focus on the
equities, without announcing a clear legal right. The Court
said that, “when the creditor’s interest in the [marital]
dwelling is weighed against that of the debtor’s family,
equitable principles persuade us that the creditor should not,
as of right, be granted [partition] at the cost of dispossessing
the family of its home.” Newman v. Chase, 359 A.2d 474,
480 (N.J. 1976).
       Consideration of the legally recognized expectations of
the nonliable spouse is thus “amenable to considerations of
degree.” Rodgers, 461 U.S. at 711. It seems here that it may
not weigh as fully against a forced sale as it would in a more
protective state, but it also may not weigh in favor of a sale
either, as New Jersey law may still discourage selling a
family home to pay a creditor, depending on the equities. See
Newman, 359 A.2d at 480. On remand, the District Court
must, of course, rely on applicable New Jersey law in
discerning the strength of Mrs. Cardaci’s legally recognized
expectations, given the facts of this case.

              3. The Likely Prejudice to the Third Party

       The third factor directs a court to “consider the likely
prejudice to the third party, both in personal dislocation costs
and in . . . practical undercompensation[.]” Rodgers, 461
U.S. at 711. The District Court focused its inquiry on the first

                              16
aspect of this factor – personal dislocation costs. It concluded
that the factor is neutral because, while Mrs. Cardaci would
face dislocation costs, the costs were no greater than in any
other foreclosure sale. We agree that there are no special
dislocation costs to consider here. But it is problematic that
the Court did not then address the “practical
undercompensation” Mrs. Cardaci might suffer in the event of
a forced sale.

        The Supreme Court recognized in Rodgers that
“financial compensation may not always be a completely
adequate substitute for a roof over one’s head.” Id. at 704.
That is particularly true when the market value of the
property in question “would be less than the price demanded
by the market for a lifetime’s interest in an equivalent home.”
Id. And, because any calculation of the cash value of a
survivorship interest “must of necessity be based on actuarial
statistics,” it “will unavoidably undercompensate persons who
end up living longer than the average.” Id. Therefore, to the
extent that a forced sale of the entire property
undercompensates the non-liable spouse for the value of her
life estate and the potential that she lives longer than
expected, this factor will weigh against a forced sale. How
strongly this factor weighs against a forced sale, however,
will depend on how great the risk of undercompensation is,
given the particular circumstances.

      In order to determine whether an innocent spouse will
be adequately compensated by a fair distribution of the
proceeds from a forced sale, a court must first determine the
amount that the spouse would receive from such a sale.
Although the District Court here did not consider the practical
undercompensation to Mrs. Cardaci, it did determine the

                              17
amount it thought she would receive from a sale because that
calculation was also necessary to the fourth factor. It said
Mrs. Cardaci’s interest in the property was worth eighty-six
percent of the property’s market value, after adopting the
mathematical reasoning proposed by the Cardacis. To
recapitulate, the Court first recognized that the Cardacis’
“survivorship rights are of equal value: 50 percent of the
property.” Cardaci, 2014 WL 7524981, at *12. It then, in
effect, found Mrs. Cardaci’s life estate to be worth seventy-
two percent of the value of her interest in the property.
Because Mrs. Cardaci has only a one-half interest in the
property, that seventy-two percent was divided by two to get
to thirty-six percent of the value of the whole property. Since
Mrs. Cardaci also had a fifty percent interest in survivorship,
the Court added that fifty percent to the thirty-six percent
value of the life estate to find that she had an eighty-six
percent total interest in the value of the property.8 The Court

      8
         One of the difficulties posed by the District Court’s
calculation was the decision to first value Mrs. Cardaci’s
interest in the home and to then add the value of a
survivorship interest on top of that. In doing so, the District
Court relied on the Supreme Court’s statement that “interests
in property, when sold separately, may be worth either
significantly more or significantly less than the sum of their
parts.” United States v. Cardaci, No. CIV. 12-5402 (JBS),
2014 WL 7524981, at *12 (D.N.J. Aug. 21, 2014) (quoting
United States v. Rodgers, 461 U.S. 677, 694 (1983)). But the
fact that the monetary value of the various interests in the
property may vary depending on whether they are sold
together or separately does not mean that the relative values –
the percentage of the whole – represented by each of those
interests will, when combined, exceed 100 percent of the

                              18
did not include Mr. Cardaci’s interest in a life estate in its
calculations, saying only that, “[a]s to the nonliable spouse[,
i.e., Mrs. Cardaci], there is an extinguishment of her valuable
right of life tenancy in that home and her right to withhold
consent to sale of her home, for which the [g]overnment owes
just compensation as a taking.” Id.; see also id. at *14 (“[A]
forced sale would extinguish property rights presently held by
the non-liable spouse, for which she must be compensated.”).

       The government argues that, based on our decision in
Popky v. United States, 419 F.3d 242 (3d Cir. 2005), the
District Court should have determined that each spouse had a
fifty percent interest in the home, without any consideration
of their respective life expectancies and future interests in the
home. The Cardacis oppose that method of calculation and

market value of the property. See In re Pletz, 221 F.3d 1114,
1118 (9th Cir. 2000) (“Because the Debtor and his wife each
have an undivided life estate in the Property with a right of
survivorship, the sum of their tenancy by the entirety interests
must equal 100% of the value of the Property.”). As an
economic matter, the market value of a property should
account for all interests in the home, including survivorship
and life estate and present possessory interests. As we
discuss herein, if the intrinsic value of the life estate to the
nonliable spouse (i.e., the personal benefit of having a roof
over one’s head) is out of proportion to his or her interest in
the market value of the home, then that is a matter to be
treated as “practical undercompensation,” Rodgers, 461 U.S.
at 711, and considered in weighing the equities. It does not,
however, mean that the life estate assumes a greater
proportion of the value of the interests in the property.

                               19
instead defend the calculation of the District Court. Neither
position is correct, but the District Court’s overarching
concern about Mrs. Cardaci being fully and fairly
compensated is sound and should be weighed under the third
factor.

       Contrary to the government’s argument, Popky is not
controlling. In that case, the marital property at issue had
already been liquidated. Popky, 419 F.3d at 243. We
concluded that the interest of each spouse in the resulting
cash was an equal fifty percent. Id. at 245. Even though the
cash itself was still held by the spouses as entirety tenants
under Pennsylvania law, id. at 243, there can be no life estate
in cash as there can in real property.9 As a result, there was
no need to turn to actuarial tables. Id. at 245.

       In this case, however, real property and a life estate
interest in that property are indeed at stake. To simply apply

       9
          The Sixth Circuit has relied on our decision in Popky
to find that the same 50/50 rule applied to real property that
had not yet been sold because the state law similarly provided
for equal interests in marital assets. United States v. Barr,
617 F.3d 370, 373 (6th Cir. 2010). New Jersey laws likewise
provides equal rights to property, but the value of a life estate
and right to survivorship necessarily varies with age.
Because we must now account for the varying values of those
rights, the simple approach we used to divide cash in Popky is
not viable outside the limited situation presented in that case.
Barr, 617 F.3d at 379 (Batchelder, C.J., concurring in part
and dissenting in part) (dissenting as to the adoption of Popky
in the context of real property because “[t]he weight of
federal law argues strongly against” a blanket 50/50 split).

                               20
the same 50/50 rule used for liquidated property held as cash
would be to ignore a critical interest in the life estate, and
controlling Supreme Court precedent. Rodgers, 461 U.S. at
704 (stating that “any calculation of the cash value of a
homestead interest must of necessity be based on actuarial
statistics”). The Cardacis were counting on being able to live
in their home all of their lives, regardless of which spouse
may outlive the other. The same could not be said for the
Popkys, who were looking only at a stack of cash. See id.
(recognizing “that in practical terms financial compensation
may not always be a completely adequate substitute for a roof
over one’s head”). The Popky rule is thus inapplicable under
these circumstances.

        Although Popky’s simple 50/50 rule does not control,
we cannot agree with the District Court’s calculation of the
Cardacis’ respective interests in the marital home. In a
tenancy by the entirety, each spouse has a concurrent interest
in the present value of the property, in a life estate, and in a
right of survivorship. See Freda, 570 A.2d at 413. But
because both the probability of obtaining the property upon
the death of one’s spouse and the value of the life estate
depend on life expectancy, any calculation of the cash value
of those interests “must of necessity be based on actuarial
statistics[.]” Rodgers, 461 U.S. at 704. That is a logical rule.
To give one admittedly extreme example, it stands to reason
that a healthy twenty-six-year-old wife would have a greater
interest in a life estate than would her ailing eighty-nine-year-
old husband. While each spouse would have the same rights
to the home, the measurable property value that they would
be likely to receive from the property is not the same.
Therefore, a method of calculation is needed that takes into
account each spouse’s concurrent interest in the present value

                               21
and their varying interests in life estate and survivorship
rights. See Newman, 359 A.2d at 477 (“[T]he purchaser at an
execution sale under a judgment entered against a tenant by
the entirety acquires the right of survivorship of the debtor
spouse as well as the interest of the latter in the life estate for
the joint lives of husband and wife.”).

       A fair approach must therefore rely on joint-life
actuarial tables to reflect the interests of both spouses. See In
re Pletz, 221 F.3d 1114, 1117-18 (9th Cir. 2000) (following
the Fifth Circuit in adopting a rule that calculates respective
interests in marital property using joint-life actuarial tables).
Such an approach accounts for differences in anticipated life
expectancies and ensures that the concurrent interests of both
spouses are correctly calculated, rather than valuing the non-
liable spouse’s interest as if she possessed an exclusive life
estate. Id. at 117 (citing United States v. Molina, 764 F.2d
1132, 1133 (5th Cir. 1985); Harris v. United States, 764 F.2d
1126, 1130 (5th Cir. 1985)). Furthermore, it avoids the
dilemma created by the District Court’s methodology, which
resulted in a sum of the various interests that exceeded one
hundred percent of the value of the property. Cardaci, 2014
WL 7524981, at *12 (“Mr. and Mrs. Cardaci own property
interests that, combined, appear to be worth more than 100
percent of the property.”). The use of joint-life actuarial
tables should assist in calculating spouses’ respective interests
in a way that does justice to both the property owners and the
government. And, if a non-liable spouse will be practically
undercompensated after that method of calculation, that fact
is an important but separate consideration for the Court to
take into account.

                                22
              4. The Relative Character and Value of the
                 Non-Liable and Liable Interests in the
                 Property

       Under the fourth factor, “a court should consider the
relative character and value of the non-liable and liable
interests held in the property[.]” Rodgers, 461 U.S. at 711. If
“the third party has no present possessory interest or fee
interest in the property, there may be little reason not to allow
the sale[.]” Id. “[O]n the other hand, [if] the third party not
only has a possessory interest or fee interest, but that interest
is worth 99% of the value of the property, then there might
well be virtually no reason to allow the sale to proceed.” Id.
It is unlikely that, based on life expectancy, the relative
character and value of the non-liable and liable interests
would be dramatically different in a tenancy by the entirety,
unless those life expectancies were also dramatically
different. Instead, this factor will more probably come into
play when the liable party owns only a relatively small
fraction of the property. For example, if the liable party
owned property inherited from a parent as a tenant in
common with five other siblings, the relative value of the
property would weigh against a forced sale. But if the liable
party owned a mansion on the property while the siblings
owned only the surrounding land, the character of the liable
party’s interest might then weigh in favor of a forced sale.

       Unlike the siblings in our example, the Cardacis own
approximately equivalent interests in the property, both in
terms of the character and value of their interests. Therefore,
the fourth factor seems neutral here. Once the Court
calculates the relative interests in the property using a joint-

                               23
life actuarial table, it will be in a position to determine more
precisely how this fourth factor weighs in the balance.

              5. Other Equitable Factors

       As previously noted, the Supreme Court warned in
Rodgers that the four equitable factors it focused on are not
an exhaustive list and should not be “used as a ‘mechanical
checklist’ to the exclusion of common sense and
consideration of special circumstances.” Id. Despite that, the
government argues it was improper for the District Court in
this case to “consider the prejudice to taxpayer’s long-term
house guests [who] … paid no rent and contributed nothing to
the carrying costs of the property or the household.”
(Opening Br. at 60.) By “house guests,” the government is
presumably referring to the Cardacis’ son Garrett and his wife
and three children. It is an odd label to hang on members of
an immediate family, but we leave it to the District Court to
decide how, if at all, the interests of Garrett’s family should
weigh in the mix.

III.   CONCLUSION

       For the foregoing reasons, we confirm the District
Court’s authority to consider whether a forced sale of the
Cardacis’ marital property should be ordered, but we will
vacate and remand for the Court to recalculate the respective
interests in the marital property and to reconsider the balance
of equities presented by this case.

                              24