Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


5-17-2005

Popky v. USA
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-2798




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                                                               NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                ____________

                                     No. 04-2798
                                    ____________

                                HOWARD D. POPKY;
                                 SHEILA A. POPKY,

                                           Appellants

                                          v.

                          UNITED STATES OF AMERICA
                                 ____________

                   On Appeal from the United States District Court
                        for the Eastern District of Pennsylvania
                                (D.C. No. 03-cv-01487)
                   District Judge: Honorable Thomas N. O’Neill, Jr.
                                     ____________

                      Submitted Under Third Circuit LAR 34.1(a)
                                   May 12, 2005

            Before: SLOVITER, FISHER and ALDISERT, Circuit Judges.

                                 (Filed: May 17, 2005)
                                     ____________

                             OPINION OF THE COURT
                                  ____________

FISHER, Circuit Judge.

      Appellants Howard and Sheila Popky, husband and wife, appeal from the District

Court’s grant of summary judgment in the government’s favor in connection with their
attempt to recover monies obtained by the government in satisfaction of a tax lien.

Appellants contend that the federal tax lien could not attach to Sheila Popky’s interest in

property owned by her and her husband as tenants by the entireties. We disagree and will

therefore affirm the judgment of the District Court.

       As we write solely for the parties, and the facts are known to them, we will discuss

only those facts pertinent to this appeal. Sheila Popky had failed to pay employment taxes

that were required to be withheld from the wages of the employees of Sheila’s EMS, Inc.,

a business which she owned. The Internal Revenue Service (“IRS”) assessed taxes of

$42,799.20 against Sheila Popky attributable to these unpaid taxes, and in September

2002, filed a notice of tax lien against her in Montgomery County, Pennsylvania, for the

same amount plus accruals. Shortly after the filing of the lien notice, Mr. and Mrs. Popky

sold real property located in Narbeth, Pennsylvania, which they owned as tenants by the

entireties. The title insurance company held $48,000 of the sale proceeds in escrow due

to the outstanding federal tax lien, and eventually issued a check to the government for

$43,324.43 to satisfy the lien. The Popkys initiated this quiet title action to recover the

proceeds paid to the IRS, and the government counterclaimed seeking unpaid

employment taxes and unpaid income taxes. The District Court granted summary

judgment to the government and entered an order awarding the government $43,324.43

on the Popkys’ claim and $15,814.47 on the government’s counterclaim.




                                              2
       The District Court had jurisdiction under 28 U.S.C. §§ 1331, 1340 and 1345. We

have jurisdiction under 28 U.S.C. § 1291, and apply plenary review to the District Court’s

grant of summary judgment. Bonneville Int’l Corp. v. Peters, 

, 490 (3d Cir.

2003). The primary issue in this appeal is whether the District Court erred in concluding

that the federal tax lien here could attach to Sheila Popky’s interest in the Narbeth

property owned by her and her husband as tenants by the entireties. The nature of Sheila

Popky’s interest in the Narbeth property is crucial because federal tax liens attach to “all

property and rights to property” of any taxpayer who neglects or refuses to pay taxes after

demand. 26 U.S.C. § 6321. The Supreme Court has made clear that whether a taxpayer’s

interest in property “held as a tenant by the entirety constitutes ‘property and rights to

property’ for the purposes of the federal tax lien statute, 26 U.S.C. § 6321, is ultimately a

question of federal law.” United States v. Craft, 

, 278 (2002). However,

this federal question “largely depends upon state law.” 

United States v. Bess,

, 55 (1958) (stating that federal tax lien statute “creates no property rights but

merely attaches consequences, federally defined, to rights created under state law.”).

       In Craft, the Supreme Court, looking to Michigan law, held that a federal tax lien

resulting from unpaid taxes attributable to one tenant by the entireties could attach to that

tenant’s interest in entireties property. The Court found that Michigan’s law of tenancy

by the entireties conferred “some of the most essential property rights” on each tenant:

“the right to use the property, to receive income produced by it, and to exclude others



                                              3
from it.” 

(citations omitted). It also noted that Michigan law gave

tenants the right to alienate or otherwise encumber the property with the consent of the

other tenant, as well as the right of survivorship. 

concluded that such

essential rights in property enjoyed by tenants by the entireties under Michigan law were

“rights to property” under the federal tax lien statute.1

       Pennsylvania’s law of tenancy by the entireties is materially similar to Michigan’s,

and thus leads us to the same result reached by the Court in Craft. As in Michigan,

tenants by the entireties in Pennsylvania have the right to possess and use the property,

see United States v. Parcel of Property Known as 1500 Lincoln Ave., 

, 77 (3d

Cir. 1991), the right to receive a share of income produced by the property, see Wylie v.

Zimmer, 

, 300 (E.D. Pa. 1951) (“The rents, issues and profits from real

property held by entireties are received and owned in a like manner.”); Johns v. Johns, 

99 (Pa. Com. Pl. 1971) (each tenant can collect and keep rental income),

and rights of survivorship. Clingerman v. Sadowski, 

, 381 (Pa. 1986).

These rights are sufficient to bring this case within Craft. We therefore conclude that




       1
         While Michigan law did not give each tenant the power to unilaterally alienate
entireties property, the Court in Craft rejected the contention that such a power was
essential to the category of “property” for purposes of § 6321. 

(noting that in prior cases it had “already stated that federal tax liens may attach to
property that cannot be unilaterally alienated.”) (discussing cases).

                                               4
Mrs. Popky had “rights to the [Narbeth] property” owned by her and her husband as

tenants by the entireties to which the federal tax lien here could attach.2

       Appellants also challenge the District Court’s valuation of Mrs. Popky’s share of

the entireties property at 50 percent. Again, however, we agree with the District Court

because a 50 percent valuation accords with the longstanding Pennsylvania common law

definition of tenancies by the entirety. See In re Estate of Brose, 

, 304-05

(Pa. 1965) (in a tenancy by the entireties, “each of the tenants holds the entire estate by

the half and by the whole.”). Indeed, the interests of tenants by the entireties are equal

both during the tenancy and following its termination. See In re Prichard, 

,

102 (Pa. 1948).3

       Accordingly, we will affirm the judgment of the District Court.




       2
        The Popkys emphasize that a tenant in Pennsylvania cannot alienate the entireties
property without the other tenant’s consent. This is true but unavailing given the Court’s
clear statement in Craft that the right of unilateral alienation is not “essential to the
category of ‘property’ [under § 6321].” 

.
       3
         The Popkys also contend that the government obtained the escrowed funds from
the title company improperly, and that they should have been permitted to retain and use
the $43,324.43 subject to the tax lien. We see no merit in either argument.

                                              5