Opinion
Case No. 02-C-345-E.
June 24, 2004
ORDER
Now before the Court is the Motion for Summary Judgment (dkt#11) of the Plaintiff, United States of America, and the Cross Motion for Summary Judgment (dkt #14) of the Defndants Allen E. Kroblin and Pamela A. Kroblin.
The United States seeks a ruling that it has a valid tax lien on certain property described as follows:
Lot One (1), Block One (1), Stonebridge Addition, a subdivision in the Southwest Quarter of the Northwest Quarter and the South Half of the Northwest Quarter of the Northwest Quarter (SW/4 NW/4 s/2 NW/4 NW/4) of Section Thirty-Four (34), Township Eighteen (18) North, Range Thirteen (13) East, City of Tulsa, Tulsa County, State of Oklahoma, according to the recorded plat thereof.
The United States additionally seeks a ruling that the lien is prior to any interest conveyed to Pamela Kroblin on February 27, 1990, and further seeks to foreclose its lien on the property.
On December 1, 1983, Roy Lee Farley and Janie Farley conveyed the subject property to Allen E. Kroblin. One September 1, 1987, Allen Kroblin transferred to subject property to himself and Pamela Kroblin as husband and wife. On February 19, 1990, the Internal Revenue Service assessed a penalty in the amount of $573,661.35 under 26 U.S.C. § 6672 against Allen Kroblin for the tax periods ending March 31, 1987. On February 27, 1990 Allen and Pamela conveyed their interest in the subject property to Pamela Kroblin solely. On May 7, 1990, the IRS filed a notice of federal tax lien against Allen Kroblin in connection with the assessment. On March 1, 1993, the IRS filed a notice of federal tax lien against Pamela Kroblin as nominee of Allen Kroblin in connection with the assessment
The parties raise two issues in the cross motions for summary judgment. The first issue is whether the conveyance to Pamela Kroblin on February 27, 1990 was made subject to the Internal Revenue Service's existing tax lien, and the second is whether the United States should be allowed to compel a sale of the entire property to satisfy the tax lien even though the property is homestead, and a non-liable spouse claims an interest in the property. The United States argues that the conveyance was subject to the IRS's valid existing lien and that a sale of the property is appropriate at this time. Defendants argues that Pamela Kroblin was a purchaser for value, and the conveyance was not subject to the lien. In addition, they argue that a sale affecting Pamela Krolin's nonliable interest would impose a hardship on her and should not be allowed.
Lien Priority
26 U.S.C. § 6321 imposes a lien on property belonging to a liable taxpayer. Section § 6321 provides:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.26 U.S.C. § 6322 provides that the lien arises at the time the assessment is made. 26 U.S.C. § 6323(a) provides:
The lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary.
Pursuant to Section 6322, the lien on Allen Kroblin's property arose on February 19, 1990, at the time the assessment was made. The question is whether the lien was valid against Pamela Kroblin on February 27, 1990 because it had not yet been filed by the Secretary. The United States argues that § 6323(a) does not help Pamela Kroblin because she was not a purchaser of the half interest that was conveyed to her on February 27, 1990. The United States argues that she was not a purchaser because she did not pay any money for the conveyance and therefore did not acquire an interest in property for adequate and full consideration. Pamela Kroblin does not deny that she did not pay money at the time of the conveyance on February 27, 1990. Rather, she argues that because she paid $105,000.00 of her own funds for her interest in the property, a question a fact exists preventing summary judgment.
Pamela Kroblin paid $100,000.00 toward the property in December, 1980. Additionally, she later paid $5,000.00 to assist in the payoff of a $70,000.00 mortgage. There is no allegation that the $5,000.00 was paid in conjunction with the February 27, 1990 conveyance. Given the timing of the payments made by Pamela Kroblin, the Court concludes that they were not made to acquire the interest acquired on February 27, 1990. As a matter of undisputed fact, Pamela Kroblin is therefore not entitled to the protection afforded by § 6323(a). The United States has a valid tax lien on the subject property, and the conveyance of February 27, 1990 was made subject to that lien.
Sale of the Property
The United States argues that the subject property should be sold, with the proceeds attributable to Allen Kroblin's interest going to satisfy his tax indebtedness. The Kroblins argue that such a sale is not appropriate under these circumstances, because it would impose a hardship on Pam Kroblin who is not liable for the taxes owed by Allen Kroblin. 26 U.S.C. § 7403(a) allows the sale of a taxpayers property to satisfy tax indebtedness of a delinquent taxpayer. In United States v. Rogers, 103 S.Ct. 2132, 2142 (1983), the Supreme Court held that § 7403 authorizes the sale of an entire property (not just the sale of the delinquent taxpayer's own interest) with a recognition of the third-party interest through judicial valuation and distribution. The Rogers Court held that the power to order a forced sale which would convert a nondelinquent spouse's homestead estate into its fair cash value is subject to the exercise of reasoned discretion. Id. at 2149. The factors to be considered in exercising discretion to decide whether to authorize a sale when the interests of nondelinquent third parties are involved are 1) the extent to which the Government's financial interest would be prejudiced if it were relegated to a forced sale of the partial interest actually liable for the delinquent taxes; 2) whether the third party would normally have a legally recognized expectation that such separate property would not be subject to forced sale; 3) the likely prejudice to the third party, both in personal dislocation costs and compensation; and 4) the relative character and value of the nonliable and liable interests in the property. Id. at 2151-52.
With respect to the first factor, the court agrees with the Plaintiff that its financial interest would be prejudiced if it were relegated to a forced sale of Allen Kroblin's interest only. The property is a single residential home, and it would simply not be feasible to sell only a limited interest in that home.See United States v. Pottorf, 898 F.Supp. 792, 796 (D.Kan. 1995). The Court is not convinced that this factor weighs in Defendants' favor by their assertions that quite a bit of time has already passed, and that any delay will likely result in a higher sales price.
With respect to the second factor, Oklahoma law does provide Pamela Kroblin with a legally recognized expectation that her homestead interest would not be subject to a forced sale for the payment of debt. However, the Court in Rodgers held that the homestead interest could be adequately discharged with the payment of compensation to the nonliable spouse. Rodgers, at 2147.
The third factor deals with the likely prejudice to the third party, both in personal dislocation costs and in compensation. In support of her argument that this factor weighs heavily against a forced sale, Pamela Kroblin submits an affidavit that she is 62, that she lives on social security and income from a part time job, that she has no ability to pay for a different place to live, and that a forced sale would impose a "substantial economic, physical and emotional hardship" on her. The Court is not persuaded by the conclusory statements in Pamela Kroblin's affidavit. She is not infirm, she is obviously able to hold down a job, and she owns an approximate 62% unencumbered interest in the house. Further, there is no evidence that she will be under-compensated for the property. The Court concludes that she will not be unduly prejudiced by a forced sale.
Lastly, the Court considers the relative character and value of the nonliable and liable interests held in the property. Obviously if the liable interest is minimal, there is no reason to allow a forced sale. Here, the liable interest is approximately 38% of the value of the property. While there is some disparity in the interests, the Court concludes that the liable interest is significant enough to be a factor in favor of a forced sale of the property.
In setting forth these four factors, the Rodgers Court makes it clear that they are not an "exhaustive list," and should not exclude consideration of common sense and special circumstances.Id. At 2152. In this instance however, neither party has brought to light any additional factors to consider. The Court concludes that, in consideration of the equities of this case, and the prejudice to either side, a forced sale is warranted.
The Motion for Summary Judgment (dkt #11) of the Plaintiff, United States of America is GRANTED and the Cross Motion for Summary Judgment (dkt # 14) of the Defndants Allen E. Kroblin and Pamela A. Kroblin is DENIED. The United States is Directed to Submit a Proposed Order of Sale within 20 days of the date of this Order. Prior to submitting this Proposed Order to the Court, Defendants are to have an opportunity to review it for their approval as to form.
IT IS SO ORDERED.
JUDGMENT
In accord with the Order filed this date sustaining the Plaintiff's Motion for Summary Judgment, the Court hereby enters judgment in favor of the Plaintiff, United States of America, and against the Defendants, Allen Kroblin and Pamela Kroblin.