Pate v. U.S. Dept. of Treasury I.R.S.

• Decision Date: 20 November 1991
• Docket Number: No. 90-7095,90-7095
• Citation: 949 F.2d 1059
• Parties: -5922 Helen PATE; William Whitfield Pate; Julia Ruth Pate; Kirksey McCord Pate, Plaintiffs-Appellants, v. UNITED STATES of America, DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1059

949 F.2d 1059

68 A.F.T.R.2d 91-5922

Helen PATE; William Whitfield Pate; Julia Ruth Pate Kirksey McCord Pate, Plaintiffs-Appellants, v. UNITED STATES of America, DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE, Defendant-Appellee.

No. 90-7095.

United States Court of Appeals Tenth Circuit.

Nov. 20, 1991.

G. Michael Blessington, Oklahoma City, Okl., for plaintiffs-appellants.

Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen, William S. Estabrook and Jordan L. Glickstein, Attys., Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Before LOGAN, MOORE and BALDOCK, Circuit Judges.

LOGAN, Circuit Judge.

Plaintiffs, the wife and children of Whit Pate, appeal from an adverse judgment entered by the district court on cross-motions for summary judgment in this quiet title action. The gravamen of the action concerns the validity of certain tax liens asserted against plaintiffs' property, which derive exclusively from the admitted tax liability of Whit Pate. ¹

The stipulated facts underlying the district court's decision, which are set forth in some detail in its Findings of Fact and Conclusions of Law filed November 26, 1990 (Findings and Conclusions), need only be briefly summarized for purposes of our analysis. Whit Pate purchased a family residence in 1975, which was titled, and mortgaged, solely in the name of his wife, plaintiff Helen Pate. In the succeeding years, Whit Pate, who earned the couple's only income, provided his wife the funds necessary to maintain and remodel their home and to pay off the original mortgage. ² In 1984, Helen Pate deeded the property jointly to the couple's children, retaining a life estate for herself. At present, the government has several liens noticed against the property arising from Whit Pate's conceded tax liabilities for the years 1983 through 1987.

The district court granted summary judgment for the government, holding that plaintiffs' property was subject to the liens arising from Whit Pate's tax liabilities, on the basis of the following two-stage analysis:

First, as to the 1975 acquisition in the name of Helen Pate, the district court concluded that Whit Pate retained an encumberable beneficial interest in the property through the legal mechanism of a purchase money resulting trust on the basis of the following reasoning:

"It is undisputed that the money to purchase the house and lot in 1975 came from Whit Pate, who has continually resided on and enjoyed the benefits of the property. The primary factual issue to be established in declaring a resulting trust is the payment of the consideration for the property, title to which has been taken in another. Such is the situation here."

Findings and Conclusions at 9 (citations omitted).

Second, the district court held that the 1984 conveyance to the children constituted a fraudulent transfer of Whit Pate's beneficial interest under Okla.Stat. tit. 24, § 116, and therefore, raised no impediment to attachment of the tax liens because

"[a]t the time of the [1984] transfer, Whit Pate had already been assessed four federal tax liens. He thus reasonably believed he would incur debts beyond his ability to pay as they became due. See § 116(A)(2)(b). The court thus finds that the transfer was made with actual intent to hinder, delay or defraud a creditor. See § 116(B)(2), 10."

Findings and Conclusions at 10.

We review the district court's summary judgment rulings de novo, applying the same legal standard used by the district court under Fed.R.Civ.P. 56(c). Abercrombie v. City of Catoosa, 896 F.2d 1228, 1230 (10th Cir.1990). "Summary judgment should be granted only if 'there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.' " Id. (quoting Rule 56(c)). In the instant case, we must determine whether the district court properly applied the applicable law to the undisputed facts.

We begin our analysis, as the district court did, with the recognition that a tax lien can attach only to a property interest owned by the delinquent taxpayer and that the existence and extent of such an interest is governed by state law. See, e.g., United States v. Rodgers, 461 U.S. 677, 683, 690-91, 103 S.Ct. 2132, 2137, 2140-42, 76 L.Ed.2d 236 (1983); Bigheart Pipeline Corp. v. United States, 835 F.2d 766, 767-68 (10th Cir.1987). With this in mind, our threshold inquiry concerns the proper treatment of the 1975 acquisition under Oklahoma law, because if Whit Pate obtained no interest in the property at that time the character of Helen Pate's subsequent conveyance ³ to the couple's children is irrelevant to the viability of the tax liens asserted exclusively through Whit Pate.

The district court found that a resulting trust arose in favor of Whit Pate primarily because he bought the property for his wife. The district court expressly relied on Copenhaver v. Copenhaver, 317 P.2d 756, 760 (Okla.1957), for the general presumption in favor of a resulting trust when title to real property is taken in one person's name but the purchase price is paid by another. See Oklahoma City v. Vahlberg, 197 Okl. 613, 173 P.2d 736 (1946). However, there is a well-established exception to this general rule which is triggered by the very circumstances in the instant case. When a husband purchases property for his wife, not only is the resulting trust presumption inapplicable, but the wife is entitled to the opposing presumption that the property is hers alone by way of a gift or advancement. See Chastain v. Posey, 665 P.2d 1179, 1182-83 (Okla.1983); Fletcher v. Fletcher, 244 P.2d 827, 830 (Okla.1952); King v. Courtney, 190 Okl. 256, 122 P.2d 1014, 1015 (1941). Accordingly, the district court's disposition cannot be supported on its stated rationale.

Indeed, absent some other basis for ascribing a cognizable property interest to Whit Pate, plaintiffs are entitled to summary judgment quieting their title to the property free and clear of the subject tax liens. The presumption against a resulting trust arising out of the 1975 acquisition controls unless rebutted by clear and convincing evidence, see Fletcher, 244 P.2d at 830; King, 122 P.2d at 1015; see generally Cacy v. Cacy, 619 P.2d 200, 202 (Okla.1980) (evidence of resulting trust "must be clear, unequivocal, and decisive beyond a reasonable doubt"), and such evidence is lacking in the stipulated record here. None of the factual circumstances regarding Whit Pate's continued rent-free residence in the family home and payment of upkeep and remodeling expenses are inconsistent with his wife's ownership of the property. Nor does the fact that Helen Pate mortgaged the home to secure loans her husband advised were necessary, and that he repaid, in any way undercut her ownership status. Moreover, Whit Pate's participation in the 1984 warranty deed to the children was appropriately limited to his legally required acquiescence in the conveyance of his wife's title to the family homestead. See Grenard v. McMahan, 441 P.2d 950, 951 (Okla.1968) (citing both state constitutional and statutory provisions requiring spousal consent to transactions involving homestead exemption). Finally, we note that the 1975 acquisition of the property was not tainted by any existing and accruing tax liabilities, which did not arise until years later.

The government appears to advance an alternative rationale to the district court's resulting trust analysis, as follows: (1) Oklahoma law provides for a "homestead exemption," i.e., a reciprocal prudential restriction on the transfer or encumbrance of the family residence which vests automatically for the protection of both husband and wife independently of any considerations of title or ownership; ⁴ (2) Whit Pate resided with his wife on the property since its purchase and therefore was vested with this homestead interest for the period in question; ⁵ (3) this court and others have held that tax liens may attach to a delinquent taxpayer's interest in the family residence despite the protections awarded the nondelinquent spouse by homestead exemptions of the sort recognized in Oklahoma; ⁶ and (4) "[t]hus, Whit Pate clearly had an interest in the homestead property at issue to which the IRS liens that were filed against him could attach." Brief for the Appellee at 20-23. There is a fatal flaw in this argument, however, arising from a fundamental misconception regarding the nature of the homestead exemption.

Depending on the controlling state law definition or characterization, a homestead exemption may create a bona fide property interest or merely afford a personal right to preclude the alienation or encumbrance of such interests. See generally United States v. Morgan, 554 F.Supp. 582, 587-88 (D.Colo.1982) (contrasting Kansas homestead exemption, which the state's courts have expressly construed to confer an estate in land, with Colorado exemption, which has been construed as only a personal exemption creating no interest in land). In Oklahoma " '[t]he homestead right is not an estate in land, but a mere privilege of exemption from execution of such...