United States of America v. Dase et al

Filing 64

MEMORANDUM OPINION AND ORDER re 60 - The court GRANTS the government's motion for entry of a decree of foreclosure and order of sale. The court FINDS that the United States has a valid tax lien attaching to Mr. Dase's interest in the pr operty located at 4624 Greensport Road, Ashville, Alabama 35953, as described above, supra at 2. The court DIRECTS the government to submit, on or before March 12, 2020, a proposed judgment of foreclosure and judicial sale of the property, which sets forth the manner in which the sale proceeds are to be distributed, the publication requirements, bidding procedures, and the manner and time of said sale. Signed by Judge Annemarie Carney Axon on 2/27/2020. (KEK)

FILED
2020 Feb-27 PM 01:52
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 is the government’s motion for entry of a decree of
foreclosure and order of sale. (Doc. 60).
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, even when an innocent third party also holds an interest in the
property. Id. § 7403(c); United States v. Rodgers, 461 U.S. 677, 680 (1983).
Here, the government obtained a default judgment against Defendant David
Scott Dase, doing business as Advance Tooling, for unpaid taxes in the amount of
$293,114.93, plus any statutory fees and interest that have accrued since September
1, 2017. (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)). Mr. Dase’s only asset is his one-half
interest in real property located in Alabama, which he shares as a tenant in common
with his sister, Defendant Rachel Kleinatland. (See Doc. 57 at 10). The government
requests that the court order the sale of the real property and apportion the proceeds
between it and Ms. Kleinatland. (See Doc. 60 at 5). Mr. Dase and Ms. Kleinatland
oppose a forced sale and request that the court exercise its limited discretion to deny
the government’s motion. (Docs. 61, 62).
I.

BACKGROUND
The property at issue in this case is a plot of land located at 4624 Greensport

Road, Asheville, Alabama 35953.1 (See Doc. 21 at 2–3 ¶ 10; Doc. 45-3 at 1). More
specifically, the property is described as:
Part of the NE ¼ of NE ¼ of Section 14, Township 14 South, Range 4
East, more particularly described as follows: From a ½ inch rod at the
point where the East line of the NE ¼ of NE ¼ intersects the South
boundary of the Beaver Valley Road, the point of beginning of property
herein described; thence S 1 degrees 01 min. E 562.79 feet to a ½ inch
rod; thence S 70 degrees 02 min. W 821.52 feet to a ½ inch rod; thence
N 0 degrees 11 min. E 560.35 feet to a ½ inch rod on the South
boundary of Beaver Valley Road; thence N 69 degrees 50 min. E along
said boundary 820.77 feet to the point of beginning, being a part of the
NE ¼ of NE ¼ of Section 14, Township 14 South, Range 4 East, St.
Clair County, Alabama.

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The exact size of the lot is unclear. Mr. Dase testified that it is “[s]even acres, something
like that.” (Doc. 45-1 at 23). The government contends—without any supporting evidence—that
the property is a five acre lot. (See Doc. 60 at 5).
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(Doc. 45-3 at 1).
This court has previously found that Mr. Dase and Ms. Kleinatland each have
a one-half interest in the property, which they inherited by intestacy from their father.
(Doc. 57 at 12–13). Although they each hold a one-half interest on the property,
only Mr. Dase and his wife live on the property. (Doc. 47-1 at 17, 23, 36).
Ms. Kleinatland has not lived on the property since the 1980s, when she was a child.
(Id. at 36). Mr. Dase has made all of the mortgage payments on the property since
2004, and paid off the mortgage in July 2018. (Doc. 47-1 at 30–32, 34; see also
Doc. 45 at 4 ¶ 10; Doc. 45-5; Doc. 45-6; Doc. 49 at 4 ¶ 10).
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, No. 4:16-cv-01957-KOB, Doc. 13
(M.D. Ala. Sept. 27, 2017). Mr. Dase has not satisfied that judgment, although the
parties agree that he has made some payments toward the judgment in unspecific
amounts. (See Doc. 45-2 at 4; Doc. 60 at 5). In March 2018, the government filed
this lawsuit against Mr. Dase and Ms. Kleinatland, along with several other
defendants who have been dismissed, seeking a forced sale of the property and
distribution of the proceeds, to satisfy part of Mr. Dase’s tax delinquency. (Docs. 1,
18, 34).

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The court declined the government’s earlier request to order a forced sale of
the property because the record was insufficient to allow the court to determine
whether a forced sale was appropriate under these circumstances. (Doc. 57 at 11).
The parties have now briefed the issue whether a forced sale of the property to satisfy
the government’s tax lien is appropriate. (Docs. 60–63).
II.

DISCUSSION
The government has obtained against Mr. Dase a default judgment in the

amount of $293,114.93 for federal employment taxes, federal unemployment taxes,
and a federal civil penalty, plus statutory fees and interest. See United States v. Dase,
No. 4:16-cv-01957-KOB, Doc. 13 (M.D. Ala. Sept. 27, 2017). Under 26 U.S.C.
§ 6321, the government automatically acquires a lien on “all property and rights to
property, whether real or personal, belonging to” someone who has failed or refuses
to pay a tax after demand. Accordingly, the court FINDS that the government has
a valid lien against Mr. Dase’s interest in the St. Clair County property. And because
the government has a valid lien against the property, 26 U.S.C. § 7403(c) permits
the court to “decree a sale of such property, . . . and a distribution of the proceeds of
such sale.”
But Ҥ 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.” United States v. Rodgers, 461 U.S. 677, 706

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(1983).2 “[T]he exercise of limited equitable discretion in individual cases can take
into account both the Government’s interest in prompt and certain collection of
delinquent taxes and the possibility that innocent third parties will be unduly harmed
by that effort.” Id. at 709. This case involves an innocent third party: Mr. Dase’s
sister, Ms. Kleinatland, who also owns a one-half interest in the property at issue and
opposes the sale of that property.
“[W]hen the interests of third parties are involved, . . . a certain fairly limited
set of considerations will almost always be paramount.” Rodgers, 461 U.S. at 709–
10. The court must consider, among other circumstances, (1) “the extent to which
the Government’s financial interests 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 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 undercompensation described [earlier in

2

Mr. Dase and Ms. Kleinatland argue that Rodgers is inapplicable because that case related
to a different type of interest in property: a homestead interest instead of a tenancy in common. In
doing so, they rely on a district court decision that made a similar distinction between property
interests. (Doc. 61 at 6; Doc. 62 at 4); United States v. Jones, 877 F. Supp. 907, 919 (D.N.J. 1995).
The court finds both the distinction and the Jones decision unpersuasive. As the Supreme Court
held in Rodgers, the plain language of § 7403 permits the government to enforce a tax lien against
“any property . . . of the delinquent . . . in which he has any right, title, or interest.” 26 U.S.C.
§ 7403 (emphasis added); Rodgers, 461 U.S. at 691–94.
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the Rodgers opinion]; and (4) “the relative character and value of the non-liable and
liable interests held in the property.” Rodgers, 461 U.S. at 710–11. In considering
those factors, the court must keep in mind that its discretion under § 7403 is limited
and that the government has a “paramount interest in prompt and certain collection
of delinquent taxes.” Id. at 711.
1. First Factor
The first factor enumerated in the Rodgers decision is “the extent to which the
Government’s financial interests would be prejudiced if it were relegated to a forced
sale of the partial interest actually liable for the delinquent taxes.” Rodgers, 461
U.S. at 710. The government contends that this factor weighs in its favor because
“[t]he forced sale value of the Subject Property is approximately $180,000,” and
although it would receive only half of that amount (the other half being distributed
to Ms. Kleinatland), $90,000 would be a substantial payment toward Mr. Dase’s tax
liability. (Doc. 60 at 5). The government argues that selling anything other than the
entire property would be prejudicial because a one-half interest would result in a
lower recovery for the government, and there is no evidence that the property
actually can be partitioned for sale. (Id.). Ms. Kleinatland and Mr. Dase do not
dispute the government’s assertion that the property as a whole would sell for
approximately $180,000, but they contend that the government has not presented

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sufficient evidence to determine whether a partial sale would be prejudicial. (Doc.
61 at 4–5; Doc. 62 at 5).
Other courts have recognized that “[p]artial interests in property often sell for
less than an equivalent pro rata share of the whole property.” United States v. Davis,
228 F. Supp. 3d 756 (W.D. La. 2017); see also United States v. Anderson, No. 08cv-6426-MAT, 2010 WL 5072958, at *3 (W.D.N.Y. Dec. 10, 2010) (“Courts have
held, and common sense dictates, that the sale of a partial interest in property,
particularly where the remaining interest is held by someone who resides at the
property, will generally yield less than if entire property is sold.”). Indeed, in
Rodgers, the Supreme Court stated: “It requires no citation to point out that interests
in property, when sold separately, may be worth either significantly more or
significantly less than the sum of their parts.” 461 U.S. at 694. And when the
property is worth more as a whole, “it makes considerable sense to allow the
Government to seek the sale of the whole, and obtain its fair share of the proceeds,
rather than satisfy itself with a mere sale of the part.” Id.
This court agrees with the common sense proposition that attempting to sell
Mr. Dase’s one-half interest in the property while allowing Ms. Kleinatland to retain
her one-half interest would result in a lower price than selling the entire property and
dividing the proceeds in half. Thus, attempting a sale of Mr. Dase’s interest alone
would prejudice the government.

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The question of partition of the property, however, is different. No party in
this case has presented any evidence about whether the property can be partitioned
and, if it can be partitioned, whether that would increase or decrease the value of that
share. See, e.g., Anderson, 2010 WL 5072958, at *3. Thus, the court cannot
determine whether partition of the property would prejudice the government’s
interest in collecting the delinquent taxes.
2. Second Factor
The second Rodgers factor is “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.” Rodgers, 461 U.S. at
710–11.
The government contends that this factor is neutral because under Alabama
law, one tenant in common can force a sale over the opposition of the other tenant
in common. (Doc. 60 at 5–6). Mr. Dase and Ms. Kleinatland do not respond to that
argument, instead asserting that Mr. Dase’s payment of the mortgage in full gave
Ms. Kleinatland an expectation that the property would not be subject to a forced
sale (doc. 62 at 5), and that under Alabama law a creditor would not be able to force
a partition or sale of the property (doc. 61 at 5–6).

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Under Alabama law, “[e]ach joint owner has the right to have the property
partitioned in kind; or if that cannot be accomplished in an equitable fashion, each
has a right to force a sale of the property and a division of the proceeds derived
therefrom.” Folsom v. United States, 306 F.2d 361, 365 (5th Cir. 1962), abrogated
on other grounds by Rodgers, 461 U.S. 677; see also Smith v. Smith, 114 So. 192,
193 (1927) (“Joint owners or tenants in common are entitled as a matter of right to
partition in kind, if the lands can be equitably divided, while the right to a sale for
division depends upon the fact, which must be averred and proved, that the lands
cannot be equitably divided.”).
In other words, even if creditors of one joint owner may not force a partition
or sale of property, the joint owner himself can force a partition or sale of the
property. Thus, Ms. Kleinatland cannot have had a “legally recognized expectation
that [the] separate property would not be subject to forced sale by the delinquent
taxpayer.” Rodgers, 461 U.S. at 710–11. To the contrary, Ms. Kleinatland could
have forced a partition or sale of the property herself. This factor weighs in favor of
the government.
3. Third Factor
The third Rodgers factor is “the likely prejudice to the third party, both in
personal dislocation costs and in the sort of practical undercompensation described
[earlier in the Rodgers opinion].” Rodgers, 461 U.S. at 711. The Supreme Court

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described two types of “practical undercompensation” in its decision, neither of
which is relevant to the type of property interest at issue in this case. See id. at 704
(explaining that the value of a homestead interest may be valued less than the price
of an equivalent home and that the cash value of a homestead interest must be based
on actuarial statistics relating to life expectancies).
The government contends that this factor weighs in its favor because
Ms. Kleinatland does not live on the property, and she would be compensated for
her interest in the property. (Doc. 60 at 5). Mr. Dase and Ms. Kleinatland concede
that Ms. Kleinatland will not incur any “personal dislocation costs” from a forced
sale, but they argue that the government has not presented evidence that she will be
adequately compensated because it has not pointed to actuarial computations, proof
of the appraised value, or the projected selling price of the property. 3 (Doc. 61 at 6–
7; Doc. 62 at 6).
The court finds that this factor weighs in favor of the government.
Ms. Kleinatland has not lived on the property since the 1980s, and will not incur any
moving costs based on a forced sale. And the cases where actuarial statistics were
necessary involved different types of property interests, such as homestead interests,
tenancies by the entirety, or life estates.

3

See Rodgers, 461 U.S. at 704–05

The court will discuss Ms. Kleinatland’s argument about her sentimental attachment to
the property after addressing the enumerated Rodgers factors.
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(homestead interest); United States v. Cardaci, 856 F.3d 267, 273 (3d Cir. 2017)
(tenancy by the entirety); Anderson, 2010 WL 5072958, at *4–5 (tenancy by the
entirety); United States v. Johnson, 943 F. Supp. 1331, 1333 (D. Kan. 1996)
(homestead interest).
Unlike the property interests at issue in Rodgers, Cardaci, Anderson, and
Johnson, Ms. Kleinatland’s interest in the property as a joint tenant does not carry
with it a right of survivorship. Actuarial statistics are not necessary to compute her
exact interest in the property: her interest is one-half. And finally, neither Mr. Dase
nor Ms. Kleinatland dispute the government’s contention that the property will likely
sell for approximately $180,000. Accordingly, the court finds that Ms. Kleinatland
will not suffer prejudice in the form of personal dislocation costs or the type of
practical undercompensation discussed in Rodgers, and this factor weighs in favor
of the government.
4. Fourth Factor
The fourth Rodgers factor is “the relative character and value of the non-liable
and liable interests held in the property.” Rodgers, 461 U.S. at 711. If “the third
party has no present possessory interest or fee interest in the property, there may be
little reason not to allow the sale[.]” Id.
The government contends that this factor weighs in favor of the forced sale
because only Mr. Dase lives at the property and Ms. Kleinatland has not indicated

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that she ever plans to live on the property. (Doc. 60 at 6–7). Ms. Kleinatland
contends that her residence on the property is irrelevant (doc. 61 at 7), but the
Supreme Court’s statements in Rodgers about possessory interests indicate
otherwise. See Rodgers, 461 U.S. at 711. The court finds that, in light of the fact
that Mr. Dase is the only owner residing on the property and paid most of the
mortgage, this factor weighs in favor of the government.
5. Remaining Factors
The Supreme Court in Rodgers noted that its list of factors is not exhaustive.
461 U.S. at 711. In her brief, Ms. Kleinatland argues that the court should consider
her sentimental attachment to the land. (Doc. 61 at 6). Although the court is
sympathetic to Ms. Kleinatland’s position, her sentimental attachment to the land
alone cannot outweigh the statutory directive contained in § 7403 that the
government may enforce its lien against “any property, of whatever nature, of the
delinquent, or in which he has any right, title, or interest.” 26 U.S.C. § 7403(a).
Ms. Kleinatland has not pointed to any other circumstance that would warrant the
court exercising its very limited discretion in this case.
At least three of the enumerated Rodgers factors weigh in favor of allowing
the forced sale, and in light of the limited evidence presented to the court, the court
cannot determine that the remaining factor favors either side. Accordingly, the court

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FINDS that a forced sale of the entire property is appropriate under these
circumstances.
III.

CONCLUSION

The court GRANTS the government’s motion for entry of a decree of
foreclosure and order of sale. The court FINDS that the United States has a valid
tax lien attaching to Mr. Dase’s interest in the property located at 4624 Greensport
Road, Ashville, Alabama 35953, as described above, supra at 2.
The court DIRECTS the government to submit, on or before March 12,
2020, a proposed judgment of foreclosure and judicial sale of the property, which
sets forth the manner in which the sale proceeds are to be distributed, the publication
requirements, bidding procedures, and the manner and time of said sale.
DONE and ORDERED this February 27, 2020.

_________________________________
ANNEMARIE CARNEY AXON
UNITED STATES DISTRICT JUDGE

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