U.S. v. Gibbons

• Decision Date: 01 December 1995
• Docket Number: No. 94-1330,94-1330
• Citation: 71 F.3d 1496
• Parties: -7825, 96-1 USTC P 50,008 UNITED STATES of America, Plaintiff-Appellee, v. David GIBBONS, Defendant, and Betty J. Gibbons, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1496

71 F.3d 1496

76 A.F.T.R.2d 95-7825, 96-1 USTC P 50,008

UNITED STATES of America, Plaintiff-Appellee, v. David GIBBONS, Defendant, and Betty J. Gibbons, Defendant-Appellant.

No. 94-1330.

United States Court of Appeals,

Tenth Circuit.

Dec. 1, 1995.

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

Robert W. Metzler, Attorney, Tax Division (Loretta C. Argrett, Assistant Attorney General, and William S. Estabrook, Attorney, Tax Division; of counsel: Henry Lawrence Solano, United States Attorney, with him on the brief), Department of Justice, Washington, D.C., for Plaintiff-Appellee.

Before HENRY and LOGAN, Circuit Judges, and ELLISON, District Judge. ^*

LOGAN, Circuit Judge.

This case involves a dispute between the United States Internal Revenue Service (IRS) and Betty J. Gibbons, the ex-wife of taxpayer David Gibbons. The IRS brought suit pursuant to I.R.C. Secs. 7401-7403, to reduce to judgment federal tax assessments against David Gibbons and to foreclose federal tax liens against real property in which he held an interest. The district court found that despite a dissolution of marriage decree awarding Betty Gibbons the conditional right to live on the property during her life, David and Betty continued to own the property as joint tenants. Thus, it held she was entitled to only one-half of the proceeds of the foreclosure sale. Betty Gibbons appeals.

I

In 1970, Betty and David Gibbons acquired title to real property in Denver, Colorado (Ogden Street property) "in joint tenancy." Appellant's App. 10, 40. They were divorced in January 1982. The dissolution decree incorporated a separation agreement that provided in relevant part

House at 325 So. Ogden held in Joint Tenancy to be occupied by Betty J. Gibbons and three minor children, and mortgage paid monthly by Betty J. Gibbons. If Betty J. Gibbons remarries and/or moves from said house, house is to be sold and equity divided equally between David J. Gibbons and Betty J. Gibbons.

Id. at 43.

Between 1984 and 1990 the IRS filed notices of federal tax liens ¹ against David for nonpayment of taxes. In June 1992 the IRS filed this suit seeking to reduce to judgment federal tax assessments against David and to foreclose the tax liens against the Ogden Street property. Betty evidently neither contested the IRS' right to seek sale of the entire property nor asked the district court to exercise its discretion to decline to order a foreclosure sale. ² She argued, however, that the separation agreement conveyed to her a life estate interest in the property for which she was entitled to be compensated. The district court rejected Betty's position; it determined that David and Betty continued to hold the Ogden Street property in joint tenancy and that Betty was entitled to only one-half of the proceeds of the forced sale.

The threshold question before us is whether, under Colorado law, the separation agreement severed the joint tenancy and conveyed to Betty a new interest in the Ogden Street property. If we find that it did then we must address whether (based on Colorado recording statutes) her failure to record her interest where deeds are registered rendered it invalid as against the recorded tax liens. Finally, if we find that Betty's interest was valid against the IRS liens, we must determine whether a stipulation of the parties is determinative of the value of her additional interest. We review de novo the district court's interpretation of both federal and Colorado law. See Salve Regina College v. Russell, 499 U.S. 225, 231 111 S.Ct. 1217, 1220-21, 113 L.Ed.2d 190 (1991).

II

The district court based its determination that the separation agreement did not create a new interest in the property in part upon cases addressing the requirement for delivery of a deed to convey property. These cases, however, addressed whether or not there was actual delivery and acceptance of a deed sufficient to pass title. See, e.g., Sims v. Sperry, 835 P.2d 565, 568 (Colo.App.1992) (when grantor did not intend to unconditionally and presently part with "possession and control or any power over the deed, for the benefit of grantee," delivery of deed did not pass title, even if deed was recorded); Stagecoach Property Owners Ass'n v. Young's Ranch, 658 P.2d 1378, 1380-81 (Colo.App.1982) (differentiating between conveyance and dedication for purposes of statute providing for conveyance of park area by subdividers). Property may be passed in many ways other than by deed, including court orders in probate of a decedent's estate and in final termination of marriages such as the one before us. See, e.g., Baker v. Baker, 667 P.2d 767, 769 (Colo.App.1983) (separation agreement, made part of divorce decree, granted wife life tenancy or leasehold estate). Rule 70 of the Colorado Rules of Civil Procedure provides that "the court ... may enter a judgment divesting the title of any party and vesting it in others and such judgment has the effect of a conveyance executed in due form of law."

Betty Gibbons asserts that the separation agreement conveyed to her a life estate interest and destroyed the joint tenancy in the Ogden Street property. Colorado has adopted the modern test for determining whether a joint tenancy has been destroyed. That test "focuses on the intent of the parties with regard to the right of survivorship characteristic." Mangus v. Miller, 35 Colo.App. 115, 532 P.2d 368, 369 (1974). Two Colorado cases are instructive on this point.

In Bradley v. Mann, 34 Colo.App. 135, 525 P.2d 492 (1974), aff'd, 188 Colo. 392, 535 P.2d 213 (Colo.1975) (en banc), a separation agreement provided that a residence would "remain in the joint names of the parties and the party residing therein shall pay all current expenses." Id. 525 P.2d at 493. The agreement further provided that the property would be sold upon the remarriage of the wife, the youngest child reaching age twenty-one, or by mutual agreement, whichever came first, with the proceeds to be divided equally between the parties. The Colorado Court of Appeals, while acknowledging that obtaining a divorce by itself is not an indication of intent to terminate joint tenancy ownership, nevertheless held the joint tenancy no longer existed. It stated that the provision for ultimate sale of the property and division of the proceeds indicated that "neither party had the ultimate expectation of receiving the other's interest in the property upon that party's death, and the ownership of the property was thereby converted to a tenancy in common." Id. 525 P.2d at 494.

In Mangus v. Miller, the Colorado Court of Appeals addressed whether a separation agreement that provided for a five-year lease to one of the parties and an option to purchase a half interest in the premises terminated a joint tenancy. The court stated that because each party had voluntarily surrendered some of their rights, they had terminated the joint tenancy. The court held that "[t]he right of either party to insist upon a sale to one or the other is wholly inconsistent with the continuance of a joint tenancy relationship." 532 P.2d at 369-70 (citation omitted). The court reasoned that the provisions of the separation agreement were inconsistent with the intent that a surviving ex-spouse should succeed to the deceased spouse's interest.

In the instant case the agreement provided that the Ogden Street property would be sold if Betty Gibbons either remarries or moves out of the home; thus Betty had the unconditional right to force the sale of the property. Under Mangus, this right is inconsistent with an intent to continue a joint tenancy. The IRS counters that the phrase "held in Joint Tenancy" in the separation agreement indicates that there was no intent to destroy the joint tenancy. But in Bradley the court stated that "[e]ven if the agreement had used the words 'joint tenancy,' we would still be required to examine the remainder of the agreement to see whether it provided for a disposition which would be inconsistent with the right of survivorship." 525 P.2d at 494 n. 1. ³ Under Colorado law, the separation agreement severed the joint tenancy.

The remaining question is to identify what interest the separation agreement conveyed to Betty Gibbons. We think the Colorado law cited above indicates that she has a possessory interest in the whole of the property and a remainder interest in one-half. We are satisfied that the possessory interest is a form of life estate--because it is capable of lasting throughout Betty's lifetime and it is not terminable at any fixed or computable period of time or at the will of ex-husband David. See Restatement of Property Sec. 18(b) (1936); see also Collins v. Shanahan, 34 Colo.App. 82, 523 P.2d 999, 1003 (1974), rev'd in part on other grounds, 189 Colo. 169, 539 P.2d 1261 (1975) (en banc) ("It has been said that a life estate exists if the interest can or may continue during a life."). Betty's interest is qualified by the conditions that she live in the home, pay on the mortgage, and that she not remarry. But these are all conditions within her power to control; her interest does not expire automatically at a fixed date nor is it subject to the will of her ex-husband. See Baker v. Baker, 667 P.2d 767, 769 (Colo.App.1983) (separation agreement providing that husband would make premises available to wife if she elected to continue in possession and paid $150 per month in rent described by court as both a life tenancy and a leasehold estate). At common law this estate would be characterized as a life estate determinable. See Restatement of Property Sec. 23, illus. 1. Whether Betty's interest is characterized a life estate determinable, a defeasible lifetime lease, or something akin to a homestead interest, she has more than a one-half interest in the property.

III

The IRS argues that even if the separation agreement conveyed to Betty Gibbons an additional interest in the Ogden Street property, her...