US v. BARCZYK

• Citation: 697 F. Supp.2d 789
• Decision Date: 24 March 2010
• Docket Number: Case No. 09-10881.
• Parties: UNITED STATES of America, Plaintiff, v. Ronald S. BARCZYK and Deborah A. Barczyk, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

697 F. Supp.2d 789

UNITED STATES of America, Plaintiff,
v.
Ronald S. BARCZYK and Deborah A. Barczyk, Defendants.

Case No. 09-10881.

United States District Court, E.D. Michigan, Southern Division.

March 24, 2010.

697 F. Supp.2d 790

Matthew Von Schuch, Washington, DC, for Plaintiff.

Fred A. Foley, Erlich, Foley, Birmingham, MI, for Defendants.

ORDER GRANTING SUMMARY JUDGMENT IN FAVOR OF THE UNITED STATES

GEORGE CARAM STEEH, District Judge.

I. INTRODUCTION

The United States sued Defendants Ronald and Deborah Barczyk to recover certain federal taxes owed by Mr. Barczyk. Before the Court are Mrs. Barczyk's Motion for Summary Judgment as to Count II of the Complaint (Dkt. # 27), and the Government's Motion for Summary Judgment (Dkt. # 28).

For the following reasons, the Court GRANTS the Government's motion for summary judgment and DENIES Mrs. Barczyk's motion.

II. BACKGROUND

Since 1979, Mr. and Mrs. Barczyk own a residence at 6091 Niles Drive, in Troy, Michigan ("the Niles Property"), as tenants by the entireties. The Niles Property is free and clear of debt, and, according to Defendants, worth approximately $200,000.

From 1996 to 2006, inclusive, Mr. and Mrs. Barczyk filed individual federal tax returns under the status of "married filing separately." During these years, Mr. Barczyk failed to pay large amounts of federal income taxes. As a result, several tax liens were created in favor of the United States, which attached to all of Mr. Barczyk's property and property rights, including the Niles Property.

In March 2009, the Government brought this action to reduce Mr. Barczyk's tax debt to judgment (Count I), and foreclose

697 F. Supp.2d 791

the liens that arose by virtue of this debt (Count II). Specifically, the Government seeks to have the Niles Property foreclosed and sold, with proceeds distributed according to the parties' respective interests

On September 21, 2009, this Court entered a default judgment against Mr. Barczyk, in the amount of $528,771.55 plus statutory interest and accruals until paid (Dkt. # 17). Therefore, the only remaining issue is the Government's request to foreclose and sell the Niles Property (Count II).

On December 3, 2009, Mrs. Barczyk filed this motion for summary judgment. The Government responded with its motion on December 18, 2009. The motions are fully briefed, and the Court heard argument on March 2, 2010.

III. APPLICABLE LAW

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(c) empowers the court to render summary judgment "forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir.2001). The Supreme Court has affirmed the court's use of summary judgment as an integral part of the fair and efficient administration of justice. The procedure is not a disfavored procedural shortcut. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Cox v. Ky. Dept. of Transp., 53 F.3d 146, 149 (6th Cir.1995).

The standard for determining whether summary judgment is appropriate is "`whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Amway Distribs. Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir.2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The evidence and all reasonable inferences must be construed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Redding, 241 F.3d at 532. "The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505 (emphasis in original); see also Nat'l Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir.2001).

If the movant establishes by use of the material specified in Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law, the opposing party must come forward with "specific facts showing that there is a genuine issue for trial." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 270, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); see also McLean v. 988011 Ont., Ltd., 224 F.3d 797, 800 (6th Cir.2000). Mere allegations or denials in the nonmovant's pleadings will not meet this burden, nor will a mere scintilla of evidence supporting the non-moving party. Anderson, 477 U.S. at 248, 252, 106 S.Ct. 2505. Rather, there must be evidence on which a jury could reasonably find for the nonmovant. McLean, 224 F.3d at 800 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505).

B. The Federal Tax Lien Statute

The United States Government has a number of tools at its disposal to collect

697 F. Supp.2d 792

delinquent taxes. Among these are §§ 6321 and 7403 of the Internal Revenue Code of 1954, 26 U.S.C. §§ 6321, 7403

When someone fails to pay a tax after a demand, § 6321 creates a lien in favor of the United States "upon all property and rights to property, whether real or personal," belonging to that person. Once the lien attaches, the Government may enforce it by filing a civil action in district court to force the sale of the attached property. § 7403(a). The statute requires that all third parties claiming interest in the property be joined in the action, in order for the court to rule on the merits of their claims. § 7403(b), (c). If the Government prevails, the court must decree a sale of the property and order the proceeds distributed among the parties according to their interests. § 7403(c).

"The purpose of the federal tax lien statute is to insure prompt and certain collection of taxes due the United States from tax delinquents." United States v. Sec. Trust & Sav. Bank, 340 U.S. 47, 51, 71 S.Ct. 111, 95 L.Ed. 53 (1950). The Supreme Court has several times remarked on the breadth of the statute, which "reveals on its face that Congress meant to reach every interest in property that a taxpayer might have." United States v. Nat'l Bank of Commerce, 472 U.S. 713, 720, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985) (citation omitted). See also Glass City Bank v. United States, 326 U.S. 265, 267, 66 S.Ct. 108, 90 L.Ed. 56 (1945) ("Stronger language could hardly have been selected to reveal a purpose to assure the collection of taxes.").

A judicial sale under § 7403 is a proceeding in rem. This means that—

the purchaser receives a complete new title and not just somebody's interest. The court finds the state of the title to the real estate in question, orders it sold if the United States has a lien on it, and divides the proceeds accordingly. All prior interests are cut off and the title starts over again in the new purchaser.

United States v. Rodgers, 461 U.S. 677, 695, 103 S.Ct. 2132, 76 L.Ed.2d 236 (1983) (quoting Rogge, The Tax Lien of the United States, 13 A.B.A.J. 576, 577 (1927)).

C. Michigan Law on Tenancies by the Entirety

Tenancy by the entirety is a unique sort of joint ownership that is only available to married persons. United States v. Craft, 535 U.S. 274, 280, 122 S.Ct. 1414, 152 L.Ed.2d 437 (2002). In United States v. Craft, the Supreme Court summarized the main characteristics of Michigan's law on tenancies by the entirety:

Michigan's version of the estate is typical of the modern tenancy by the entirety. . . . Michigan characterizes its tenancy by the entirety as creating no individual rights whatsoever: "It is well settled under the law of this state that one tenant by the entirety has no interest separable from that of the other.... Each is vested with an entire title." And yet, in Michigan, each tenant by the entirety possesses the right of survivorship. Each spouse ... may also use the property, exclude third parties from it, and receive an equal share of the income produced by it. Neither spouse may unilaterally alienate or encumber the property, although this may be accomplished with mutual consent. Divorce ends the tenancy by the entirety, generally giving each spouse an equal interest in the property as a tenant in common, unless the divorce decree specifies otherwise.

Id. at 281-82, 122 S.Ct. 1414 (quoting Long v. Earle, 277 Mich. 505, 517, 269 N.W. 577, 581 (1936)) (other citations omitted).

In Craft, the Supreme Court held that federal tax liens under 26 U.S.C. § 6321

697 F. Supp.2d 793

may attach to property held by a delinquent taxpayer and his nondelinquent spouse as tenants by the entireties. Therefore, there is no dispute that the liens on Mr. Barczyk's property have also attached to his interest in the Niles Property

IV. ANALYSIS

Mrs. Barczyk does not dispute that federal tax liens have attached to her husband's interest in the Niles Property. However, she contends that a judicial sale would illegally deprive her of the survivorship interest vested in entireties tenants under Michigan law. Alternatively, she argues that her interest in the Niles Property exceeds half of its value. The Government responds that Mrs. Barczyk's survivorship interest is not a barrier to selling the Niles Property, and that she is entitled to no more than half of the proceeds from a sale.

A. Applicable Supreme Court Precedent

The parties' arguments revolve around two Supreme Court cases. In United States v. Rodgers, 461 U.S. 677, 103 S.Ct. 2132, 76 L.Ed.2d 236 (1983), the Court discusses whether the Government can force the sale of property in which a delinquent taxpayer shares interest with his unindebted spouse. In United States v. Craft, 535 U.S. 274, 122...