United States v. S. Davis, Sr.
681 F. App'x 338
5th Cir.2017Background
- In 1989 S.P. Davis, Sr. and his wife Sharon purchased and built a residence in Shreveport as community property. Sharon died intestate in 2013.
- After Sharon's death, Davis owned 50% of the property outright and held usufruct over the other 50%; their children S.P. Davis, Jr. and Kharmen each inherited a 25% naked ownership interest subject to that usufruct.
- In August 2002 federal trust-fund tax assessments were made against Davis; a federal tax lien attached to his property. A 2008 judgment held Davis jointly and severally liable for over $3.1 million and ordered monthly payments.
- The government sued under 26 U.S.C. § 7403 in 2012 to foreclose the federal tax liens on the residence, naming Davis, (after Sharon’s death) the two children, and Regions Bank (the mortgagee).
- The district court granted the government’s motion for summary judgment and ordered foreclosure and sale of the property (subject to prior-recorded security interests); Davis’s motion for partial summary judgment seeking to protect the children’s share was denied.
- On appeal the Fifth Circuit affirmed: federal tax liens attached to the community property; the court did not abuse its narrow discretion under § 7403 in ordering sale; the children’s inherited naked ownership interests are junior to the preexisting federal lien.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court should decline to order sale under 26 U.S.C. § 7403 | U.S.: sale is appropriate to collect unpaid taxes | Davis: court should exercise discretion to prohibit sale (protect heirs’ interests) | Sale proper; court did not abuse limited discretion to refuse to withhold sale |
| Whether federal tax liens attach to the property interest after termination of community regime | U.S.: lien attached during marriage and survives termination; may be enforced against property | Davis: heirs’ post-death interests should block/separate proceeds | Lien attached during community continues to encumber property; enforceable post-termination |
| Priority of heirs’ naked ownership interests vs. federal tax lien | Heirs: each entitled to one-quarter of net sale proceeds after mortgage | U.S.: government’s lien is prior in time and has priority over heirs’ interests | Heirs’ interests are inferior; government’s lien has priority (subject to recorded mortgage) |
| Appropriateness of summary judgment | U.S.: no genuine dispute of material fact; summary judgment proper | Defendants: disputed factual/legal issues justify refusing summary judgment | No material factual dispute; summary judgment for government affirmed |
Key Cases Cited
- United States v. Rodgers, 461 U.S. 677 (1983) (§ 7403 leaves limited, rigorous discretion to refuse a forced sale)
- Aquilino v. United States, 363 U.S. 509 (1960) (state law governs property interests to which federal tax liens attach)
- United States v. City of New Britain, Conn., 347 U.S. 81 (1954) (priority principle: first in time, first in right)
- Capitol Indem. Corp. v. United States, 452 F.3d 428 (5th Cir. 2006) (summary judgment standard review)
- Day v. Wells Fargo Bank Nat’l Ass’n, 768 F.3d 435 (5th Cir. 2014) (quotation of Rule 56 standard)
- United States v. Davenport, 106 F.3d 1333 (7th Cir. 1997) (discussing Rodgers factors limiting equitable discretion)
- City of Dallas v. United States, 369 F.2d 645 (5th Cir. 1966) (priority of federal liens)
- Jordan v. Hamlett, 312 F.2d 121 (5th Cir. 1963) (priority/priority doctrines applied to federal liens)