NEEDREPLACE
| Decision Date | 21 February 2014 |
| Docket Number | Criminal No. 13–0043–WS. |
| Parties | UNITED STATES of America, Plaintiff/Garnishor, v. Michael A. McARTHUR, Defendant, and Navy Federal Credit Union, and its successors or assigns, Garnishee. |
| Court | New York District Court |
OPINION TEXT STARTS HERE
Motion granted. Sinan Kalayoglu, U.S. Attorneys Office, Mobile, AL, for Plaintiff.
Arthur J. Madden, III, Madden & Soto, Mobile, AL, for Defendant.
FINAL ORDER FOR DISPOSITION OF GARNISHED FUNDS
This matter comes before the Court on the Government's Motion for Final Order for Disposition of Garnished Funds (doc. 29), with incorporated memorandum of law.
On or about April 8, 2013, defendant, Michael A. McArthur, entered a guilty plea in this Court to one count of wire fraud, in violation of 18 U.S.C. § 1343. According to the Factual Resume that McArthur signed in connection with his plea, he engaged in a scheme and artifice to defraud his employer, Gulf Shores Golf Association, by obtaining money from it without authorization, by means of false and fraudulent representations. (Doc. 2, at 16.) McArthur agreed that this scheme and artifice to defraud caused a total loss to the company of between $30,000 and $70,000. ( Id.) On July 23, 2013, the undersigned sentenced McArthur to probation for a term of five years, and ordered him to make restitution to Gulf Shores Golf Association in the amount of $56,911.51, pursuant to 18 U.S.C. § 3663A. ( See doc. 17.) Contemporaneously with sentencing, the Court entered a money judgment in the amount of $56,911.51 against McArthur pursuant to Rule 32.2(b)(1)(A), Fed.R.Crim.P. ( See doc. 16.)
As a matter of federal statute, this restitution order operates as “a lien in favor of the United States on all property and rights to property of the person fined as if the liability of the person fined were a liability for a tax assessed under the Internal Revenue Code of 1986.” 18 U.S.C. § 3613(c). In partial satisfaction of that lien, the Government obtained a Post–Judgment Continuing Writ of Garnishment (doc. 22) directed to garnishee, Navy Federal Credit Union (“NFCU”). The Clerk's Office issued the Writ of Garnishment to NFCU on October 17, 2013. The Government served copies of the Application and Writ of Garnishment, the Clerk's Notice with sample Request for Hearing and/or Transfer and Claim for Exemption Form, and instructions for objecting to the Garnishee's Answer and for obtaining a hearing, on both McArthur and Deborah McArthur (an interested party and McArthur's spouse) via Federal Express at their last known residential address on October 21, 2013. ( See doc. 23.)
In its Second Amended Answer to the Writ of Garnishment, NFCU reported that it had possession, custody or control of a savings account (the “Account”) in which McArthur had an interest. (Doc. 28, at 3.) According to that pleading, the Account (whose last four digits are 5201) is a joint account in the names of McArthur and Deborah McArthur, with a balance of $9,846.39. NFCU's Answer elaborated on the Account as follows: ( Id.) NFCU certified that it served a copy of this Second Amended Answer on McArthur via U.S. Mail on November 14, 2013. ( Id. at 6.) To date, neither McArthur nor Deborah McArthur has filed an objection to the proposed garnishment, claimed any exemption, or requested a hearing. The 20–day period established by 28 U.S.C. § 3205(c)(5) for objections or requests for hearings has long since expired.
As noted, both McArthur and his wife are listed as joint owners of the Account that the Government seeks to garnish. But the restitution order runs solely against McArthur, not his wife. Accordingly, a critical threshold question is whether the Government is entitled to garnish such co-owned property in enforcing the restitution order, which functions like an IRS tax lien pursuant to 18 U.S.C. §§ 3613(c) and 3613(f). In accordance with § 3613(c), once restitution was ordered, all of McArthur's property became subject to a lien in favor of the United States. The Government's enforcement powers on that lien (which has since been perfected) reach “all property or rights to property” of McArthur. 18 U.S.C. § 3613(a). To determine whether McArthur's interest in the Account constitutes “property or rights to property” under § 3613 and the federal tax lien statute, “[w]e 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 the federal tax lien legislation.” United States v. Craft, 535 U.S. 274, 278, 122 S.Ct. 1414, 152 L.Ed.2d 437 (2002) (citation omitted). In the vernacular of the time-honored Cardozo “bundle of sticks” paradigm for analyzing property rights, Id. at 278–79, 122 S.Ct. 1414.
In looking to state law to determine McArthur's rights in the Account, the Government urges the Court to apply Florida law. This conclusion is proper, inasmuch as McArthur and his wife are domiciled in Florida; moreover, it appears that they opened the Account at a NFCU branch in Florida. ( See doc. 29, Exh. 2, at 4.) Under Florida law, “[a]ny deposit or account made in the name of two persons who are husband and wife shall be considered a tenancy by the entirety unless otherwise specified in writing.” Fla. Stat. § 655.79(1). Nothing in the Account documents of record demonstrates that McArthur and his wife ever specified in writing that the Account was not to be considered a tenancy by the entirety; therefore, the statutory presumption controls and the Account is entireties property.1
Ordinarily, a tenancy by the entirety spells trouble for a creditor seeking to collect a judgment against one spouse, but not both. Under Florida law, “property held by husband and wife as tenants by the entireties belongs to neither spouse individually, but each spouse is seized of the whole.” Beal Bank, SSB v. Almand and Associates, 780 So.2d 45, 53 (Fla.2001) (citation omitted); see also In re Pierre, 468 B.R. 419, 426 (Bankr.M.D.Fla.2012) () (citation and internal quotation marks omitted). “As long as all the unities remain intact, ... each spouse's interest comprises the whole or entirety of the property and not a divisible part; the estate is inseverable.” United States v. One Single Family Residence with Out Buildings Located at 15621 S.W. 209th Ave., Miami, Fla., 894 F.2d 1511, 1514 (11th Cir.1990) (citations omitted). Thus, under Florida law, “[c]reditors cannot levy on entireties property to satisfy the debt of an individual spouse.” Id. at 1515 (citation omitted); see also United States v. Ryals, 480 F.3d 1101, 1110 (11th Cir.2007) ().
Notwithstanding the foregoing, Craft teaches that state law determines only McArthur's rights in the Account, while federal law determines whether those rights constitute “property” or “rights to property” within the scope of the Government's enforcement powers for a tax lien (or, in this case, a restitution order in a criminal case). Federal law provides that “the IRS's federal statutory powers to tax and attach liens to property trumped any state property rights afforded to a taxpayer who holds property by the entireties with her spouse.” In re Sinnreich, 391 F.3d 1295, 1298 (11th Cir.2004); see also Ryals, 480 F.3d at 1110. Indeed, the Supreme Court has held that a debtor's “interest in the entireties property constituted ‘property’ or ‘rights to property’ for the purposes of the federal tax lien statute,” and that an IRS lien could therefore attach to that property even though state law would preclude levy on entireties property to execute on a judgment against one spouse or the other. Craft, 535 U.S. at 288–89, 122 S.Ct. 1414. Thus, the IRS possesses authority “to divide the property rights of tenancy by the entireties property,” to enforce a tax lien. Sinnreich, 391 F.3d at 1297. The Government persuasively argues that, because 18 U.S.C. § 3613 confers the same enforcement rights on it in the context of a criminal restitution order that a tax lien would confer on the IRS,2 the Government likewise is entitled to divide and execute on McArthur's property rights in the Account, despite its status as entireties property. See generally In re Gidner, 2013 WL 5596971, *7 (Bankr.N.D.Tex. Oct. 11, 2013) (); United States v. Banks, 2013 WL 357823, *4 (N.D.Tex. Jan. 10, 2013) () (citations omitted).
The cases cited above and in the Government's brief arise largely in the context of an IRS levy, which is “a summary, non-judicial process, a method of self-help authorized by statute which provides the Commissioner with a prompt and...
To continue reading
Request your trial