United States of America v. Winsper et al

Filing 98

MEMORANDUM OPINION AND ORDER signed by Senior Judge John G. Heyburn, II on 07/14/2014. IT IS HEREBY ORDERED that the Government's Motion for Summary Judgment 93 is SUSTAINED, and Defendants' Motion for Summary Judgment 95 is DENIED. Therefore, the Government is entitled to foreclose on the Winspers' residence. Final Order. cc: Counsel of Record (TJD)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. No. 3:08-CV-631-H

UNITED STATES OF AMERICA

PLAINTIFF

v.
MALCOLM C. WINSPER, et al.,

DEFENDANTS

MEMORANDUM OPINION AND ORDER
For the second time, the Court considers essential aspects of this case. Previously, the
Court entered summary judgment for the United States (the “Government”) against Defendant,
Malcolm Winsper (“Winsper”), reducing to judgment the tax assessment against Mr. Winsper in
the amount of $901,052.17. Because foreclosure on that amount would have affected spousal
property, the Court, on motion of the parties, applied the factors in United States v. Rodgers, 461
U.S. 677, 709 (1983) and found that the Government could not foreclose on the Winspers’
residence under the circumstances. See United States v. Winsper, No. 3:08CV–631–H, 2010 WL
3829408 (W.D. Ky. Sept. 23, 2010), rev’d, 680 F.3d 482 (6th Cir. 2012).
On appeal, the Sixth Circuit held that the Court abused its discretion and remanded the
case for this Court to revisit the Rodgers factors. United States v. Winsper, 680 F.3d 482, 489
(6th Cir. 2012). Upon remand, the Court allowed Mrs. Winsper additional time to submit
evidence as to the Rodgers factors. The Court now revisits the Rodgers factors.

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I.
The United States government has the power to place a lien “upon all property and rights
to property, whether real or personal, belonging to such person” if a citizen fails to pay taxes. 26
U.S.C. § 6321; see United States v. Rodgers, 461 U.S. 677, 681–82, (1983). There is no dispute
that here, a federal tax lien can attach to Winspers’ residence. See Winsper, 680 F.3d at 488. It
is also clear that Ҥ 7403 does not require a district court to authorize a forced sale under
absolutely all circumstances, and that some limited room is left in the statute for the exercise of
reasoned discretion.” Rodgers at 706.
The Sixth Circuit held that this Court misapplied three of the four Rodgers factors and
that contrary to the Court’s previous understanding, “the Rodgers factors do not address the
scope of the government’s discretion to foreclose, but, rather, the district court’s discretion not to
foreclose.” Winsper, 680 F.3d at 489 (emphasis omitted). The Sixth Circuit has emphasized that
the Rodgers factors constitute a balancing test that control the Court’s limited discretion. See
United States v. Barr, 617 F.3d 370, 376 (6th Cir. 2010), cert denied. The Court will reexamine
the Rodgers factor balancing test to determine whether or not it should exercise its discretion to
deny foreclosure of the Winspers’ spousal property to satisfy Mr. Winsper’s tax lien.
II.
The first factor from Rodgers 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 at 710. If the sale of Mr. Winsper’s partial interest in the spousal
property (here, the Winspers’ primary residence) could satisfy the debt owed to the Government,
then a forced sale of it would be unnecessary. However, the Sixth Circuit held that “given the

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minimal value of Malcolm Winsper’s partial interest, the government has a greater interest in a
forced sale of the entire property.” Winsper at 490.
On the other hand, the Supreme Court’s enunciation of the rule itself suggests that “the
extent”—something quantifiable—matters to a court’s analysis.

Here, the dollar amount

difference between a sale of Mr. Winsper’s interest and the full amount is $71,500.1 This is a
sizeable difference, thus, on reexamination, the Court agrees with the Sixth Circuit that this
factor is not neutral but weighs in the Government’s favor.
The Sixth Circuit reasoned that neither the lengthy period of time that had elapsed nor the
small percentage of total indebtedness that the forced sale of marital property would satisfy
negated the potential prejudice to the Government of being allowed to foreclose only on Mr.
Winsper’s partial interest.

Winsper, 680 F.3d at 489-90. This Court previously relied on the

discussion in United States v. Reid, 127 F. Supp. 2d 1361 (S.D. Ga. 2000), regarding the age of
the assessment but the Sixth Circuit held that that case is not analogous here. Id. at 490.
Finally, the Sixth Circuit held that this Court was mistaken to rely on Reid and consider
“the percentage of the debt that would be satisfied rather than the dollar amount that would be
collected.” Id. at 490-91. The Circuit Court held that the percentage of debt to be fulfilled is
not important in terms of the potential prejudice to the Government’s financial interests. Id.
Mrs. Winsper has introduced no new arguments on this factor. Therefore, overall, the
first Rodgers factor weighs clearly in the Government’s favor.

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See Winsper, 680 F.3d at 487. This Court concluded that the real value of the residence was roughly $200,000 and
it was agreed that after a forced sale and payment of the mortgage interest and expenses of the sale, the Government
would receive about $71,500.

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III.
The second factor from Rodgers asks “whether the third party with a non-liable separate
interest in the property would, in the normal course of events (leaving aside § 7403 and eminent
domain proceedings, of course) 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. The Sixth Circuit agreed with this Court’s finding that this factor weighs in
favor of Mrs. Winsper and the Court did not abuse its discretion because “the government
concedes that Kentucky law provides a legally recognized expectation that property owned by a
husband and wife as tenants in the entirety will not be subject to forced sale to satisfy the debts
of one spouse.” Winsper, 680 F.3d at 491 (citing Raybro Elec. Supplies, Inc. v. Barclay, 813
F.Supp. 1267, 1269 (W.D. Ky. 1992)). Nothing has changed this assessment.
IV.
The third Rodgers factor considers “the likely prejudice to the non-liable third party both
in ‘personal dislocation costs’ and ‘the sort of practical undercompensation described [in the
context of the sale of a homestead interest].’” Winsper, 680 F.3d at 491 (quoting Rodgers, 461
U.S. at 711). The Sixth Circuit found that this factor did not weigh in Mrs. Winsper’s favor, as
this Court had previously held. Id. at 492.
This Court previously found that the $71,500 from a forced sale of the residence would
not allow Mrs. Winsper to find other reasonable housing. The Sixth Circuit held that this
conclusion was unsupported speculation. Id.

While admitting that Mrs. Winsper could be

prejudiced by practical undercompensation, the Sixth Circuit wrote that that fact is not selfevident or supported by the record. Id. The Circuit found that leaving “a home with enormous

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sentimental value would itself not present special circumstances of prejudice that weigh against
foreclosure of the entire property.” Id.
Once again, Mrs. Winsper has not provided any significant new evidence of this issue.
Consequently, this Court has no basis to find contrary to the Sixth Circuit. The Court concludes
that the third factor weighs in favor of the Government.
V.
The fourth Rodgers factor instructs that “a court should consider the relative character
and value of the non-liable and liable interests held in the property.” Rodgers, 461 U.S. at 711.
If the non-liable third party has an interest in the property and “that interest is worth 99% of the
value of the property, then there might well be virtually no reason to allow the sale to proceed.”
Id. The Court previously concluded that Mrs. Winsper’s interest in the property is 50% or more
but the Sixth Circuit held that “any claim that Barbara Winsper might have an interest in the
property greater than 50% based on the likelihood that she will outlive her husband is precluded
by this court’s decision in Barr.”

Winsper, 680 F.3d at 492; see Barr, 617 F.3d at 372.

Furthermore, Kentucky law clearly says that tenants in the entirety have identical property rights
and there would be an equal division of the rights even if the tenancy by the entirety was
terminated. Winsper, 680 F.3d at 492 (citing Cowan v. Pleasant, 263 S.W.2d 494 (Ky. 1953)).
Ultimately, the Sixth Circuit suggested this fourth factor is neutral in this case because Mrs.
Winsper has a possessory interest but there is no reason to believe that her interest “swamps the
interest of the delinquent taxpayer.”

Winsper, 680 F.3d at 493 (citing Barr, at 377 n.1)

(Batchelder, J., dissenting in part)).
Nothing has changed since the Sixth Circuit ruling. On reexamination of this factor, the
Court agrees that this factor is neutral here.

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VI.
In light of the Sixth Circuit’s ruling in this case, the Winspers have conceded that the first
Rodgers factor, if properly applied, would not weigh against her.2 The Winspers suggest that the
Sixth Circuit opinion does not offer enough guidance in terms of the third Rodgers factor and
asked that the Court consider that factor in light of the reasoning put forth in United States v.
Marciello, No. 09–12089–JLT, 2013 WL 1282385 (D. Mass. Jan. 28, 2013). The Court has
determined that the Sixth Circuit guidance is sufficient to find that it weighs in favor of the
Government. Defendants have supplied no other reason to suggest that the Court should use its
limited discretion in order to deny the foreclosure of their property.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that the Government's Motion for Summary Judgment is
SUSTAINED, and Defendants’ Motion for Summary Judgment is DENIED. Therefore, the
Government is entitled to foreclose on the Winspers’ residence.
This is a final order.

July 14, 2014

cc:

2

Counsel of Record

DN 94, p. 8-9.

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