United States of America v. Dase et al

Filing 57

MEMORANDUM OPINION AND ORDER - The court DENIES the government's motion for summary judgment. The court GRANTS IN PART Mr. Dase's and Ms. Kleinatland's motions for partial summary judgment and ENTERS SUMMARY JUDGMENT in favor of Ms. K leinatland and Mr. Dase and against the government on the government's claim that Mr. Dase owns the property in full. The court DENIES IN PART their motions with respect to their arguments that the government cannot foreclose on the property under 26 U.S.C. § 7403. Signed by Judge Annemarie Carney Axon on 9/23/2019. (KEK)

FILED
2019 Sep-23 AM 10:20
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
DAVID SCOTT DASE, doing business
as Advance Tooling, et al.,
Defendants.

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4:18-cv-00501-ACA

MEMORANDUM OPINION AND ORDER
Before the court are cross-motions for summary judgment filed by Plaintiff
United States (doc. 45), Defendant Rachel Kleinatland (doc. 47), and Defendant
David Scott Dase, doing business as Advance Tooling (doc. 49).
A person’s failure “to pay any tax” after the government’s demand for
payment creates “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. § 6321.
The government may enforce the lien by requesting that the court order a judicial
sale of that property. Id. § 7403(c); United States v. Rodgers, 461 U.S. 677, 680
(1983).
In this case, it is undisputed that the government has obtained a default
judgment against Mr. Dase for unpaid taxes. (Doc. 45-2 at 3; see also United States
v. Dase, case no. 4:16-cv-01957-KOB, Doc. 13 (M.D. Ala. Sept. 27, 2017)). As a

result, the government requests that the court order the sale of property that it
contends Mr. Dase owns. (See Doc. 21 at 4). The parties agree that Mr. Dase has
an interest in the property at issue, but they dispute how much of an interest. The
government contends that Mr. Dase owns the property in full; Mr. Dase and
Ms. Kleinatland contend that each of them has a one-half interest.
The government seeks summary judgment on its own claims that Mr. Dase
owns the property in full and that it is entitled to seek a forced sale of the property
under § 7403. (Doc. 45). Ms. Kleinatland seeks partial summary judgment on the
government’s claim that Mr. Dase owns the property in full, and requests that the
court either enter an order preventing the government from foreclosing on her
interest in the property, or order the government to compensate her for the loss of
her use of the whole property. (Doc. 47). Mr. Dase seeks partial summary judgment
on the government’s claim that he owns the property in full, and requests a finding
that the government cannot enforce its lien against the property. (Doc. 49).
As the court will discuss in more detail below, under Alabama’s intestacy
laws, the undisputed evidence establishes that Mr. Dase and Ms. Kleinatland each
have a one-half interest in the land.

Accordingly, the court DENIES the

government’s motion for summary judgment. The court GRANTS IN PART
Mr. Dase’s and Ms. Kleinatland’s motions for partial summary judgment and
ENTERS SUMMARY JUDGMENT in their favor and against the government on

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the government’s claim that Mr. Dase owns the property in full. But the court
DENIES IN PART Mr. Dase’s and Ms. Kleinatland’s motions for partial summary
judgment as to their other requests. The three parties to this case must do further
briefing on those issues before the court can rule on them.
I.

BACKGROUND
On cross-motions for summary judgment, the court “draw[s] all inferences

and review[s] all evidence in the light most favorable to the non-moving party.” Fort
Lauderdale Food Not Bombs v. City of Fort Lauderdale, 901 F.3d 1235, 1239 (11th
Cir. 2018) (quotation marks omitted). In this case, the parties agree on all of the
facts; they disagree only about the legal import of those facts.
Mr. Dase and Ms. Kleinatland’s parents, Walter and Anita Dase,1 jointly
owned the property at issue in this case, each with a right of survivorship. (Doc. 453; see also Doc. 47-1 at 16–17). Mr. Dase and his wife have lived on the property
continuously since the mid-2000s, while Ms. Kleinatland has lived elsewhere. (Doc.
47-1 at 17, 23, 36). In 2004, Walter and Anita Dase entered into a lease sale contract
with Mr. Dase. (Doc. 45-5). Mr. Dase agreed to make monthly payments of
$677.51 to his parents until he had paid $63,703.03, and his parents agreed that once
he had paid in full, “the rent paid under this Lease shall be considered a payment for

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Because Walter, Anita, and Scott Dase all share a last name, the court will refer to the
defendant, Scott Dase, as “Mr. Dase,” and it will refer to his parents, Walter and Anita Dase, by
their full names.
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said property, and [they] shall make and execute a warranty deed conveying said
property to [Mr. Dase].” (Id. at 1–2).
Mr. Dase made each monthly payment directly to the mortgagee of the
property.

(Doc. 47-1 at 30–31).

While Mr. Dase was making the promised

payments, Anita Dase died, followed several years later by Walter Dase. (Doc. 471 at 29–31). After Walter Dase died, Ms. Kleinatland produced a handwritten
document signed by “W Dase,” which stated: “All possessions belonging to myself
or my passed wife Anita will be split and distributed between Scott [Dase] and
Rachel [Kleinatland]. These possessions are at the farm,” the farm being the
property at issue in this case. (Doc. 55-1).
Mr. Dase and Ms. Kleinatland did not open a probate estate for either of their
parents’ estates (see Doc. 47-1 at 34), but Mr. Dase continued to make mortgage
payments directly to the mortgagee. (Id. at 30, 32). He completed the payments
required under the sale lease contract in 2012 and paid off the mortgage on the
property in July 2018. (See Doc. 45 at 4 ¶ 10; Doc. 45-6; Doc. 45-7; Doc. 49 at 4
¶ 10; Doc. 47-1 at 30–31, 67).
In October 2017, the government obtained a default judgment against
Mr. Dase in the amount of $293,114.93 for federal employment taxes, federal
unemployment taxes, and a federal civil penalty, plus statutory fees and interest.
(Doc. 45-2 at 3; see also United States v. Dase, case no. 4:16-cv-01957-KOB,

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Doc. 13 (M.D. Ala. Sept. 27, 2017)). Mr. Dase has not satisfied that judgment,
although the parties dispute whether he has made any payments toward the
judgment. (See Doc. 45-2 at 4). In March 2018, the government filed this lawsuit
against Mr. Dase and Ms. Kleinatland, along with several other defendants who have
been dismissed. (Docs. 1, 18, 34).
After Mr. Dase paid off the mortgage on the property, the government filed
an amended complaint, seeking an order that Mr. Dase owns the property, that the
government’s tax liens be foreclosed on his interest in the property, that the property
be sold under 26 U.S.C. § 7403, and that the proceeds of the sale be distributed to
the government and Defendants in accordance with the priority of their claims or
interests. (Doc. 21 at 4).
II.

DISCUSSION
In deciding cross-motions for summary judgment, the court must determine

whether, accepting the evidence in the light most favorable to the non-moving party,
the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a);
see also Fort Lauderdale Food Not Bombs, 901 F.3d at 1239. To avoid any
confusion about the standard applicable to each motion, the court will address the
government’s motion first, followed by Mr. Dase’s and Ms. Kleinatland’s motions.

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1. The Government’s Motion for Summary Judgment
The government contends that Mr. Dase holds equitable title to the entire
property because (1) the evidence shows that Walter and Anita Dase intended to
convey the property to Mr. Dase but died before they could effectuate that intent, or
alternatively (2) the sale lease contract was an executory contract that gave Mr. Dase
an equitable interest in the entire property once Walter and Anita Dase signed it.
(Doc. 45 at 6–10 & 10 n.5).
As an initial matter, if Alabama’s intestacy law controls the outcome of this
case, then Mr. Dase and Ms. Kleinatland each inherited a one-half interest in the
property. Under Walter and Anita Dase’s survivorship warranty deed, Walter Dase
took the real property in fee simple after Anita Dase’s death. (Doc. 45-3 at 1); see
Fretwell v. Fretwell, 218 So. 2d 138, 140 (Ala. 1969) (“[A] surviving joint tenant
becomes the absolute owner of the property held in joint tenancy upon the death of
the contenant, free of the claims of the heirs, because the survivor does not acquire
title through the deceased but by virtue of the deed.”). The parties agree that Walter
Dase later died intestate with two surviving children: Mr. Dase and
Ms. Kleinatland.2 (See Doc. 21 at ¶ 14; Doc. 47 at 2 ¶ 6; Doc. 49 at 5).

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The document that Mr. Dase left does not qualify as a will under Alabama law. See Ala.
Code § 43-8-131.
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In Alabama, if a decedent leaves no surviving spouse,3 the estate passes “[t]o
the issue of the decedent; if they are all of the same degree of kinship to the decedent
they take equally.” Ala. Code § 43-8-42(1). “Real estate passes immediately to the
heirs upon the death of the intestate.” Ala. Code § 28-9-203(c)(1). Thus, when
Walter Dase died, the real property passed immediately to Mr. Dase and
Ms. Kleinatland as tenants in common, each with a one-half interest in the property.
See id. §§ 28-9-203(c)(1), 43-8-42(1); Ex parte Arvest Bank, 219 So. 3d 620, 628
(Ala. 2016); Clayton v. Clayton, 75 So. 3d 649, 654 (Ala. Civ. App. 2011)
(“[T]enants in common are not considered to own the entirety of the parcel, as in a
joint tenancy; rather, each tenant in common owns an undivided part of the parcel.”).
The government does not quarrel with that analysis, but contends that because
Mr. Dase entered a sale lease contract with his parents before their deaths and fully
performed all of his obligations under that contract after their deaths, in equity he is
the sole owner of the property, effectively preempting the application of Alabama’s
intestacy statute. (Doc. 45 at 6–8). In support of that argument, the government
points to the Supreme Court’s decision Wadsworth v. Hannah, 431 So. 2d 1186 (Ala.
1983). The court finds the Wadsworth decision distinguishable.

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Although Walter Dase left a surviving spouse, she has disclaimed all interest in the
property. (See Doc. 36).
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In Wadsworth, a landowner promised that he was going to convey parcels of
land to two couples who were living on those parcels. 431 So. 2d at 1187. In
exchange, the couples provided “valuable services” for the landowner. Id. at 1187–
88. The landowner had an attorney prepare deeds for each parcel but died before he
could sign the deeds. Id. at 1188. His heir refused to convey the parcels of land to
the couples, who then filed suit seeking title to realty. Id. The Alabama Supreme
Court stated that “a court of equity treats as done that which ought to have been done
to carry into effect the intention of the parties” and held that the couples had been
“vested with equitable title to the property.” Id. at 1189.
In Wadsworth, the couples had already performed all of the promised services
and the landowner had prepared the deeds before he died; only his untimely death
prevented the conveyance of the property. Wadsworth, 431 So. 2d at 1188–89. By
contrast, in this case, Mr. Dase had not yet performed all of his obligations under the
contract before his parents’ deaths. The government has not presented any evidence
from which the court can conclude that Walter Dase intended to convey the property
to Mr. Dase before Mr. Dase made all of the payments promised in the sale lease
contract. The property still belonged to Walter Dase when he died, so Alabama’s
intestacy law provides for its disposition.
The government argues in the alternative that the sale lease contract was an
executory contract that vested an equitable interest in the property in Mr. Dase as

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soon as Walter and Anita Dase entered the contract. (Doc. 45 at 8–10 & 10 n.5).
The government’s only authority for that argument is Grass v. Ward, 451 So. 2d 803
(Ala. 1984), but its reliance on Grass is misplaced.
In Grass, Mabel Ward contracted with the landowner to make mortgage
payments on a property in exchange for the landowner’s agreement to convey the
property to her once she made the final mortgage payment. 451 So. 2d at 804.
Ms. Ward made all the mortgage payments but “never procured a deed to the house.”
Id. After Ms. Ward died intestate, both the landowner and Ms. Ward’s daughter
claimed title to the house. Id. The Alabama Supreme Court held that “an equitable
conversion occurred when [Ms. Ward] paid off the mortgage and fulfilled the terms
of the agreement.” Id. at 805. In other words, once she fulfilled her obligations
under the contract, “the real interest or equitable title passed to Mabel Ward.” Id. at
806.
In this case, Mr. Dase had not made all of the promised payments under the
contract, so he did not take “real interest or equitable title” to the property before
Walter Dase’s death. The government states that “[i]t is of no moment that Walter
and Anita Dase died before conveying the Subject Property to Dase. Rather, the
equitable conversion occurred (and thus Dase obtained his interest [in] the Subject
Property) when Walter and Anita Dase signed an executory contract that would
eventually require them to execute a warranty deed.” (Doc. 45 at 10 n.5). But the

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government provides no authority to support that statement, and as explained above,
the Grass decision holds only that a party takes her interest in the property after
fulfilling all of her own obligations under a contract, not that a party takes her interest
as soon as the contract is executed.
The government makes no other arguments supporting its position that
Mr. Dase holds the only interest in the property, and under Alabama’s intestacy law,
Mr. Dase and Ms. Kleinatland inherited a one-half interest in the property.
However, in one sentence of its summary judgment brief, the government states that
even if Ms. Kleinatland holds an interest in the property, it can still foreclose on the
property under 26 U.S.C. § 7403. (Doc. 45 at 11; see also Doc. 56 at 6–7). The
court will briefly address that assertion.
The Supreme Court has held that the government may seek a forced sale of
property in which a delinquent taxpayer holds an interest, even if a third party also
holds an interest. Rodgers, 461 U.S. at 691–94. In that situation, however, “§ 7403
does not require a district court to authorize a forced sale under absolutely all
circumstances, and . . . some limited room is left in the statute for the exercise of
reasoned discretion.”

Id. at 706.

“[W]hen the interests of third parties are

involved, . . . a certain fairly limited set of considerations will almost always be
paramount.” Id. at 709–10. The court must consider, among other circumstances,
(1) “the extent to which the Government’s financial interests would be prejudiced if

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it were relegated to a forced sale of the partial interest actually liable for the
delinquent taxes”; (2) “whether the third party with a non-liable separate interest in
the property would, in the normal course of events, . . . have a legally recognized
expectation that that separate property would not be subject to forced sale by the
delinquent taxpayer or his or her creditors”; (3) “the likely prejudice to the third
party, both in personal dislocation costs and in the sort of practical
undercompenasation described [earlier in the Rodgers opinion]; and (4) “the relative
character and value of the non-liable and liable interests held in the property.” Id. at
710–11.
The government’s sole argument is that because Mr. Dase paid the mortgage
on the property, Ms. Kleinatland’s interest in the property is “minimal” (doc. 56 at
6), and the court “should apportion the sale proceeds so that they be attributed more
to Dase’s interest than to Kleinatland’s” (doc. 45 at 11). The court notes that this
argument assumes that the court will find that a forced sale is reasonable under
Rodgers, but the court cannot make that determination based on this record and this
briefing. Even if the court could decide that a forced sale is appropriate here, the
government’s argument is wholly insufficient to allow the court to apportion
Mr. Dase’s and Ms. Kleinatland’s interests in the property at this point.
Accordingly, the court DENIES the government’s motion for summary judgment.

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2. Defendants’ Motions for Partial Summary Judgment
Both Mr. Dase and Ms. Kleinatland have filed motions for partial summary
judgment. (Docs. 47, 49). Although their motions differ slightly, the analysis for
each is the same.
Ms. Kleinatland and Mr. Dase seek a summary judgment on the government’s
claim that Mr. Dase owns the property in full. (Doc. 47 at 3; Doc. 49 at 5–7).
Ms. Kleinatland also seeks a summary judgment that her interest in the property
prevents a forced sale under 26 U.S.C. § 7403. (Doc. 47 at 3). Mr. Dase seems to
request a summary judgment that the government either cannot enforce its tax lien
against the property (doc. 49 at 1), or can do so only against his one-half interest in
the property (id. at 8).
Even taking the facts in the light most favorable to the government, it cannot
prevail on its claim that Mr. Dase owns the property in full. As discussed above, the
evidence establishes as a matter of law that under Alabama’s intestacy statute,
Mr. Dase and Ms. Kleinatland each have a one-half interest in the property.
Accordingly, the court GRANTS Ms. Kleinatland’s and Mr. Dase’s motions for
partial summary judgment with respect to the government’s claim that Mr. Dase
owns the property in full.
But the court cannot grant Ms. Kleinatland’s motion seeking a judgment that
her interest in the property can prevent a forced sale under 26 U.S.C. § 7403. As

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discussed above, under § 7403 the government may seek a forced sale of property
in which a delinquent taxpayer holds an interest, even if an innocent third party also
holds an interest in the property. See Rodgers, 461 U.S. at 691–94. Accordingly,
the court DENIES Ms. Kleinatland’s motion with respect to that argument.
Finally, Mr. Dase’s motion for partial summary judgment begins by asking
for a finding that the government cannot enforce its tax lien against the property
(doc. 49 at 10), and concludes by asking the court to find that the government’s
“claim to enforce tax lien can only apply to Mr. Dase’s ½ interest” (id. at 8). To the
extent that Mr. Dase seeks a finding that the government may not foreclose on the
property, as discussed above, the court cannot rule on that issue yet. Accordingly,
the court DENIES Mr. Dase’s motion with respect to that request.
III.

CONCLUSION

The court DENIES the government’s motion for summary judgment. The
court GRANTS IN PART Mr. Dase’s and Ms. Kleinatland’s motions for partial
summary judgment and ENTERS SUMMARY JUDGMENT in favor of
Ms. Kleinatland and Mr. Dase and against the government on the government’s
claim that Mr. Dase owns the property in full. The court DENIES IN PART their
motions with respect to their arguments that the government cannot foreclose on the
property under 26 U.S.C. § 7403.

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DONE and ORDERED this September 23, 2019.

_________________________________
ANNEMARIE CARNEY AXON
UNITED STATES DISTRICT JUDGE

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