Opposition Brief — United States v. Craft

Supres:: Cou US.

4 FILED

~/

AWG 7? 2001 ,

No. 00-1831 |

OFFIC® Ct CHE CLERK

IN THE

Supreme Court of the United States

UNITED STATES of AMERICA, acting through

the INTERNAL REVENUE SERVICE,

Petitioner,

v.

SANDRA L. CRAFT,

Respondent.

On PETITION FOR Writ oF CERTIORARI TO THE

UniTepD STATES CourRT OF APPEALS FOR THE SIXTH CIRCUIT

BRIEF IN OPPOSITION

JEFFERY A. MOYER

STENGER & STENGER, P.C.

Attorneys for Respondent

4095 Embassy Drive, SE

Grand Rapids, MI 49546

(616) 940-1190

168643 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

QUESTIONS PRESENTED

1. Does this Court have jurisdiction to consider the

petition or is the petition by the Internal Revenue Service

time-barred?

2. Is the only proper issue on appeal the correct

application by the Sixth Circuit of the doctrines of “Law of

the Case” and “Law of the Circuit” in the case below?

3. Did the Sixth Circuit correctly decide the issue of

tax lien attachment either or both times it ruled on the matter

in this case?

4. Whether this case presents issues of sufficiently far-

reaching importance for the Court to exercise its certiorari

powers?

li iii

TABLE OF CONTENTS Contents

Page | Page

| PPFTT TET i E. This case does not have such far-reaching

implications or compelling reasons as to merit

RES Se il granting certiorari to review multiple

decisions of the Sixth Circuit. ........... 29

ee GE Ge PONIES occ ccc ccccccccccces iv

ON i 30

Ne Se ec ceceeeees eens |

Corrected Statement of the Case ............... 2

Reasons for Denying the Writ ..............5.. 5

A. The relief sought by the IRS Petition is time-

Ee ee ee eee eT 5

B. The appeal from the decision of the Sixth

Circuit should be limited to the correct

application of the “law of the case” and “law

of the circuit” doctrines. .............05: 6

C. The relief being sought by the IRS is

barred by the terms of the original escrow

PTT ET TT ETT TELE TTT TTL 8

D. The Sixth Circuit decision on the issue raised |

by the IRS’s petition was correct in 1998, was )

correct in 2000, and is correct now. ....... 9 )

Michigan law prior to 1991. ............. 14

Federal law prior to 1991. ...........45. 19

What has CRAMGOET 2... cc ccccccccccccecs 27

iv

TABLE OF CITED AUTHORITIES

Page

Cases:

Agostino v. Felton, 521 U.S. 203 (1997) ......... 6

Albro v. Allen, 434 Mich. 271 (1990) ........... 19, 28

Appeal of Lewis, 85 Mich. 340 (1891) .......... 14

Aquilino v. United States, 363 U.S. 509 (1960) ... 9, 12, 13

Budwit v. Herr, 339 Mich. 265 (1954) .......... 4,17

Burnet v. Commonwealth Improvement Co.,

ey GE nebbedeeseeebubabenienas 30

Cole v. Cardoza, 441 F.2d 1337 (6th Cir. 1971)

ee ee Nae 8, 22, 23, 24, 28, 29

Dept. of Banking v. Pink, 317 U.S. 264 (1942) .... 2

Drye v. United States, 528 U.S. 49 (1999) ...7,9, 11, 12

Farrell v. Paulus, 309 Mich. 441 (1944) ......... 16

Fed. Election Commsn. v. NRA Political Victory

PURE, FED UB. TE CIGD oc ccccccccccccccses: l

Fed. Power Commsn. v. Idaho Power Co., 344 U.S.

RRR ORE Yeas ery Pe 2

Fed. Trade Commsn. v. Colgate-Palmolive Co.,

Se DOPED cocucedecccoudseseeuess 2

v

Cited Authorities

Page

Fed. Trade Commsn. v. Minneapolis-Honeywell

Regulator Co., 344 U.S. 206 (1952) .......--. 1,2,8

Fetter v. United States, 269 F.2d 467 (6th Cir.

SEED ccccccdcvcecesecescsuscovesccoseees 21, 22

Hanover Insur. Co. v. American Engineering Co.,

105 F.3d 306 (6th Cir. 1997) ........--.5555- 7

Hearns v. Hearns, 333 Mich. 423 (1952) ........ 16

Helvering v. Wood, 309 U.S. 344 (1940) ........ 30

In the Matter of Grosslight (Liberty State Bank and

Trust v. Grosslight), 757 F.2d 773 (6th Cir.

PPP errr 24

Long v. Earle, 277 Mich. 505 (1936) ........--. 15

Matton Steamboat Co. v. Murphy, 319 U.S. 412

CODED o cccccccccccccsvevceseccecnessocess 8

McLean v. United States, 224 F. Supp. 726 (E.D.

DGlat, BOGRD 2. ccccccccccccccccccccccccess 22

McMullen v. Zabawski, 283 F. 552 (E.D. Mich.

GED ccccccccccsecccncsoccccsceccecesces 22

Missouri v. Jenkins, 495 U.S. 33 (1990) ......... l

Morgan v. Commissioner, 309 U.S. 78 (1940) . .9, 12, 13

Nurmi v. Beardsley, 275 Mich. 328 (1936) ....... 15

vi

Cited Authorities

Page

Rogers v. Rogers, 136 Mich. App. 125 (1984) ....

iehnecenusteectisudsiatedencéabade 9, 14, 18, 28

Sanford v. Bertrau, 204 Mich. 244 (1918) ..... 4, 15,17

Schram v. Burt, 111 F.2d 557 (6th Cir. 1940)... .. 20

Shaw v. United States, 94 F. Supp. 245 (W.D. Mich.

SEE S4dG0uChbbnesenatnedendcebacesectens 20

SNB Bank & Trust v. Kensey, 145 Mich. App. 765

Dy #b06dednekeeteednetdeebondsdcdoonus 19, 28

Tamplin v. Tamplin, 163 Mich. App. 1 (1987) .... 28

Toledo Scale Co. v. Computing Scale Co., 261 U.S.

DPE Savncdbatdduadeddhontsuienseces 2

Tyler v. United States, 281 U.S. 497 (1930) ...... 9,10

United States v. Bess, 357 U.S. 51 (1958) ...... 9,11, 12

United States v. Certain Real Property Located at

2525 Leroy Lane, 972 F.2d 136 (6th Cir. 1992)

per eRNecsnesoeneceegeesenebesedeel 9, 12, 25, 26

United States v. Irvine, 511 U.S. 224 (1994) ....3,9,11

United States v. Nathanson, 60 F. Supp. 193

Se ED SUED Nk vecevesecestevcseseccess 21

United States v. National Bank of Commerce,

Soe > PEPE &66ceced secesoevacens 9, 10, 12

vil

Cited Authorities

United States v. Rodgers, 461 U.S. 677 (1983) ...

Vinton v. Beamer, 55 Mich. 559 (1885) .........

Warburton v. White, 176 U.S. 484 (1900) ........

Zimmern v. United States, 298 U.S. 167 (1936) ...

Statutes:

11 U.S.C. § 522(b)(2)(B) ........000000000000.

PPS EE ce enscececsaeaceccessasecees

SO UBL. F Z0GUED oo wc cccccccccccccccccccece

LE 6 066 Hesduncdcacccoecasennaces

MOREA § SS7.IGE 2. cc cccccccccccccccccccccece

l

JURISDICTION

The Respondent respectfully asserts that this Court does

not have jurisdiction to entertain the petition of the Petitioner

based on its failure to comply with the terms of 28 U.S.C.

§ 2101.

The Petitioner makes the same argument before this court

as it did in its petition before the Sixth Circuit Court of Appeals

unsuccessfully on September 16, 1997. The Sixth Circuit ruled

against the Petitioner in its first opinion in this case, Craft v.

United States, 140 F.3d 638 (6th Cir. 1998) (“Craft 7”) released

on April 1, 1998. However, the Petitioner chose not to appeal

the adverse ruling of the Sixth Circuit within ninety days as

required by statute. See 28 U.S.C. § 2101(c).

The requirements 28 U.S.C. § 2101 are mandatory and

jurisdictional in nature. Fed. Election Commsn. v. NRA Political

Victory Fund, 513 U.S. 88, 90 (1994), citing Missouri v. Jenkins,

495 U.S. 33, 45 (1990). Failure to comply with the requirements

of 28 U.S.C. § 2101 results in this Court not having jurisdiction

to entertain the petition before it. NRA, 513 U.S. at 99; Jenkins,

495 U.S. at 45; Fed. Trade Commsn. v. Minneapolis-Honeywell

Regulator Co., 344 U.S. 206, 207-208 (1952).

The fact that the Sixth Circuit remanded the case back to

the District Court for consideration of an entirely different issue,

does not alter the finality of the Sixth Circuit’s reversal of the

earlier District Court’s decision on the issue raised by the

Petitioner’s petition. No argument on the issue of tax lien

attachment to tenancy by the entireties real property was heard

by the District Court on remand, and the Sixth Circuit refused

to allow the IRS to make the same argument to it on appeal for

the second time in this case. Craft v. United States, 233 F.3d

358, 363, 369, 375 (6th Cir. 2000) (“Craft IT’)

Since there was no change whatsoever, material or

otherwise, in the original determination of the Sixth Circuit on

the issue of tax lien attachment to tenancy by the entireties

property either on remand to the District Court or on appeal to

the Sixth Circuit the second time, the IRS had to have filed its

petition for writ of certiorari no later than July 29, 1998 for its

2

petition to have been considered timely under 28 U.S.C.

§ 2101(c). However, the Petitioner failed to file by that date.

The mere fact an earlier judgment is restated or revised in an

immaterial way does not toll the time within which review must

be sought. Fed. Trade Commsn. v. Colgate-Palmolive Co.,

380 U.S. 374, 378 (1965), citing Fed. Trade Commsn. v.

Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 211-213

(1952) and Fed. Power Commsn. v. Idaho Power Co., 344 U.S.

17, 20 (1952); Dept. of Banking v. Pink, 317 U.S. 264 (1942);

Toledo Scale Co. v. Computing Scale Co., 261 U.S. 399 (1923).

Furthermore, this case is factually different from a

procedural standpoint from those cases where this Court has

held the Court of Appeals made a material change in the pnmary

or significant issue at stake (See Zimmern v. United States, 298

U.S. 167 (1936)), or cleared up a genuine ambiguity when the

case came before it a second time (Jdaho Power Co., 344 U.S.

at 20), thereby allowing a proper petition for writ of certiorari

to be filed within ninety days of the release of the second decision

by the respective Court of Appeals.

In fact, no change whatsoever has occurred in the Sixth

Circuit’s single main holding released on April 1, 1998, the

IRS chose not to appeal the ruling at that time, the petition for

writ of certiorari is therefore not timely under the requirements

of 28 U.S.C. § 2101(c), and this Court should reject the petition

on the grounds of lack of proper jurisdiction.

CORRECTED STATEMENT OF THE CASE

Both Petitioner’s Statement of the Case and its Reasons

for Granting the Petition contain numerous misstatements,

omissions of fact and introduce factual evidence for the first

time throughout its brief. Accordingly, Respondent offers the

following clarifications to correct the account of the facts given

by the Petitioner for this case.

Paragraph 1.b. of the Petitioner’s Statement of the Case

discloses the stipulation entered into between the IRS and the

Respondent to allow the sale of the home, but fails to indicate

that, under the terms of the original stipulation, the escrowed

3

proceeds would be subject to the same right, title and interest

the tax lien had on the property itself. (See Craft J, 140 F.3d at

640; Memorandum of Law in Support of United States’ Motion

for Summary Judgment filed 9/13/93, Summary of Case, page

2, Statement of Fact #12, page 3).

The Petitioner goes on to state in paragraph 3.a. on page 4

while describing the first Sixth Circuit decision in 1998 that,

“In reaching that conclusion, the majority relied on the common-

law fiction, adopted in Michigan, that property held in a tenancy

by the entirety is not owned by either spouse but is instead owned

by the ‘marital unit’ ”, and repeats that misstatement again on

page 17. Nothing could be more inaccurate. The Sixth Circuit

decision in Craft v. United States, 233 F.3d 358

(6th Cir. 2000) (“Craft IT’), which was authored by Judge Guy

Cole who also wrote the Craft J opinion, specifically rejects

that recurring statement by the IRS. (“Indeed, the Craft / court

rejected the IRS’s argument that it was being duped by a state

law legal fiction.” Craft IJ, 233 F.3d at 368). Despite that

inaccurate description being specifically reyected by the Sixth

Circuit both times, that phrase permeates the Petitioner’s

argument throughout this case in an ill-advised attempt to have

this Court seize upon that language and conclude that this case

is appropriate for review as being contrary to the holding of

United States v. Irvine, 511 U.S. 224(1994) which does discuss

the principle of state law fictions not precluding the operation

of federal tax liens.

While it is part of the Petitioner’s later argument,

footnote 5 on page 10 of the Petitioner’s brief contains factual

representations from another case that have never been

considered by any lower court in this case. Furthermore, the

Petitioner uses those supposed facts to reach a legal conclusion

which is patently false. The Petitioner states,

Instead of paying these taxes, the lawyer used his

untaxed income to accumulate equity in four parcels

of property that he placed in a tenancy by the

entirety.* * *, but the taxpayer’s transparent scheme

4

to avoid collection appears likely to succeed in the

absence of review by this Court of the decision in

this case.

However, nothing could be further from the truth. In fact, the

exact opposite occurred in this case since a recovery was realized

by the IRS. In this case, on remand the District Court held that

where mortgage payments by the delinquent taxpayer created

additional equity im the tenancy by the entireties real property,

the payments fraudulently enhanced the tenancy to the detriment

of his creditors including the IRS, and the Court entered a

judgment against the escrowed funds in the amount of equity

created by those payments. Craft v. United States, 65 F. Supp.

2d 651, 658-659, 661-662 (W.D. Mich. 1999); affirmed by Craft

I], 233 F.3d at 370-371. A denial of certiorari would preserve,

if anything, the status quo and would preserve the IRS’s current

ability to recover equity from the other delinquent taxpayer

under the supposed facts alleged, based on the lower court

rulings in this case and existing Michigan caselaw.

At footnote 7 on page 11 of the Petitioner’s brief, the IRS

again attempts to support its argument with representations

about factual statistics that have never been entered into

evidence nor considered by any court at any level at any time

in this case.

The IRS, on pages 12 and 13 of the petition, also improperly

restates a statutory definitions argument that was first raised at

oral argument on appeal before the Sixth Circuit on August 10,

2000, the second time that Court heard this case.

The Petitioner also ignores prior holdings of the Michigan

Supreme Court in defining property rights under Michigan law

when it refers to the “right of survivorship”. The Michigan

Supreme Court, which stands as the Court of last resort in

interpreting Michigan common law, held that survivorship is

actually an incident of the tenancy, and not a separate property

nght. Budwit v. Herr, 339 Mich. 265, 272-273 (1954); Sanford

v. Bertrau, 204 Mich. 244, 248-249 (1918).

The IRS petition makes various representations in footnote

16 about the characteristics of tenancies by the entireties in

5

various states, without ever having presented evidence or proof

of that information to any lower court in this case. The Petitioner

also makes these assertions to this Court without further

explaining that even within its subgroup of states that prohibit

creditors of one spouse from executing against entireties

property, there are varied state law definitions of the tenancy in

those states such that a federal tax lien may or may not attach to

entireties property in that state.

REASONS FOR DENYING THE WRIT

The Respondent contends that it is unnecessary for this

Court to review the two decisions of the Sixth Circuit in the

present case since: (1) the Court does not have proper jurisdiction

based upon the Petitioner’s failure to have filed its petition in

accordance with the requirements of 28 U.S.C. § 2101(c);

(2) no conflict between the Circuits has been alleged; (3) there

are no far-reaching implications or compelling reasons since it

has not been previously demonstrated to any lower court that

these decisions effect anyone other than Michigan taxpayers;

and (4) the well-reasoned opinions of the Sixth Circuit in 1998

and 2000 both correctly set forth the analysis that its decisions

do not conflict with any established, controlling precedent by

this Court, nor any recent changes in the law.

A. The relief sought by the IRS Petition is time-barred.

This action was originally commenced on April 26, 1993

as an Action to Quiet Title by Plaintiff Sandra Craft against the

Internal Revenue Service. After two proceedings in 1994 and

1995 before the U.S. District Court for the Western District of

Michigan, the issue presented by the IRS Petition was argued

on appeal to the U.S. Sixth Circuit Court of Appeals on

September 16, 1997. The opinion and judgment of the Sixth

Circuit was released on April 1, 1998 and the IRS filed no Notice

of Appeal within the 90-day period to do so after that date.

28 U.S.C. § 2101(c). That opinion reversed the District Court

on the issue now presented by the IRS’s Petition and only

remanded the case back to the District Court for consideration

of an entirely different and separate issue. Even the District

6

Court Judge indicated on remand that the Sixth Circuit had

decided with finality the issue of the tax lien of one spouse

attaching to tenancy entireties property in Michigan,

In addition, the Sixth Circuit held that Don did

not possess a separate future interest in the Berwyck

Property to which the lien could have attached. See

id. at 644. Thus, the Sixth Circuit effectively held

that Sandra prevailed on her complaint to quiet title.

However, the court found that “[d]espite the fact that

the tax lien did not attach to the Berwyck Property,

there remains an issue of whether a fraudulent

conveyance occurred in this case. . . .” Accordingly,

the Court remanded the case for determination of

the fraudulent conveyance issue.

Craft v. United States, 65 F. Supp. 2d 651, 653 (W.D. Mich.

1999).

As indicated by the District Court on remand, the reversal

by the Sixth Circuit served as a final adjudication on the merits

of the IRS claim by holding that the tax lien of one spouse did

not attach to the property while held as tenants by the entirety.

No new argument on this issue has been entertained by any

court in this case since September 16, 1997.

B. The appeal from the decision of the Sixth Circuit should

be limited to the correct application of the “law of the

case” and “law of the circuit” doctrines.

“Under the law of the case doctrine, a court ought not reopen

issues decided at an earlier point in the same litigation.”

See Agostino v. Felton, 521 U.S. 203, 236 (1997), as cited in

Craft II, 233 F.3d at 363. As Craft IT succinctly stated,

At this juncture, this case is not really about federal

tax liens. Nor is it about state law property rights.

This case is about the extent to which a prior decision

of this court binds a subsequent panel when neither

the facts, the parties, nor the law has changed.

On appeal, the IRS reasserts its argument that a

§6321 federal tax lien against an individual taxpayer

J

attaches to a tenancy by the entirety that the taxpayer

shares, pursuant to Michigan law, with his spouse.

This is, of course, the very argument we rejected in

Craft I. For the reasons that follow, the government

is precluded from re-arguing its case at this time.

(Emphasis added). Craft I], 233 F.3d at 363.

With no ability to re-argue the issue, the last court to

properly hear the tax lien argument was the Sixth Circuit in

1997, and the IRS did not appeal after the April 1, 1998 decision

was released. To allow the IRS to again make its argument

after it chose not to appeal in 1998, would be to allow the IRS

“to ‘panel-shop’ and pursue, willy nilly, two or more bites at

the apple of settled law.” Craft I], 233 F.3d at 365.

The law of the case doctrine is designed to insure that,

“Issues decided at an early stage of the litigation, either explicitly

or by necessary inference from the disposition, constitute the

law of the case.” Hanover Insur. Co. v. American Engineering

Co., 105 F.3d 306, 312 (6th Cir. 1997). Hanover set out three

alternate grounds for reconsidering a prior ruling in the same

case: “(1) where substantially different evidence is raised on

subsequent trial; (2) where a subsequent contrary view of the

law is decided by the controlling authority; or (3) where a

decision is clearly erroneous and would work a manifest

injustice.” Hanover, 105 F.3d at 312.

On the second Sixth Circuit appeal the Court found that its

earlier decision was not clearly erroneous, and therefore never

reached the other required part of that ground for reconsideration

that the decision would work a manifest injustice. Craft I], 233

F.3d at 364-365. The IRS only included one new case which

had not been argued before the Sixth Circuit earlier in 1997.

The Sixth Circuit rejected the IRS argument that this Court’s

decision in Drye v. United States, 528 U.S. 49 (1999)

represented a subsequent contrary view of the law as decided

by the controlling authority. Craft //, 233 F.3d at 366-369.

Despite the District Court conducting an evidentiary hearing in

1999 on remand, the IRS submitted no new evidence whatsoever

8

to the Sixth Circuit at the second appeal on the issue of federal

tax lien attachment to tenancy by the entireties property.

The Sixth Circuit also held that Craft / and its predecessor,

Cole v. Cardoza, 441 F.2d 1337 (6th Cir. 1971), constituted

law of the circuit and could not be overturned by a subsequent

panel. It reached that decision after holding that Craft / was not

clearly erroneous, and had not been called into doubt by any

subsequent decision of this Court. Craft I/, 233 F.3d at 369.

The law of the case and law of the circuit are principles

which, like the jurisdictional restrictions contained in 28 U.S.C.

§ 2101, are designed to promote the universal principle of all

courts that all “litigation must at some definite point be brought

to an end.” Minneapolis-Honeywell, 344 U.S. at 213, citing

Matton Steamboat Co. v. Murphy, 319 U.S. 412, 415 (1943).

Both principles were correctly applied by the Sixth Circuit panel

in Craft IJ and should not be disturbed on appeal.

C. The relief being sought by the IRS is barred by the terms

of the original escrow stipulation.

The IRS argument throughout this litigation has been that

the tax lien attached to some interest of Don Craft prior to the

August 28, 1999 Quit-Claim Deed which allowed the lien to

remain inchoate until the tenancy was terminated. The IRS has

conceded that the binding stipulation between Respondent and

the IRS was such that “50% of the net proceeds were retained

in escrow subject to the same right, title and interest that the

federal tax lien had in the property itself.” (Memorandum of

Law in Support of United States’ Motion for Summary

Judgment filed 9/13/93, Summary of Case, page 2, Statement

of Fact #12, page 3; also Craft I, 140 F.3d at 640).

The language of the stipulation contained in the escrow

letter was clear and unequivocal in that it applied to the 50%

share of the'net proceeds from the earlier sale of the house,

which were being escrowed. Therefore, to the extent the IRS

tax lien had any validity whatsoever, it would only have attached

to those escrowed proceeds and remained so until some future

termination of the tenancy by virtue of either a[nother] future

conveyance, the couple’s divorce, or death of one spouse.

9

The next development that would terminate the tenancy

by the entirety was the death of Don Craft on August 10, 1998.

Upon the death of one spouse in a tenancy by the entirety, the

surviving spouse owns the property in fee simple absolute,

which was the Respondent. (See concurrence of Judge Gilman,

Craft IT, 233 F.3d at 378; United States v. Certain Real Property

Located at 2525 Leroy Lane, (“Leroy Lane I’) 972 F.2d 136,

138 (6th Cir. 1992); Rogers v. Rogers, 136 Mich. App. 125,

135 (1984)). The original escrow stipulation signed between

the parties renders the very relief the IRS seeks moot and is

barred by its own specific terms.

D. The Sixth Circuit decision on the issue raised by the

IRS’s petition was correct in 1998, was correct in 2000,

and is correct now.

The IRS’s petition is a final attempt to have this Court

judicially “occupy the field” by establishing a national common

law of real property.

The IRS petition suggests the two decisions of the Sixth

Circuit conflict with decisions of this Court. Drye v. United

States, 528 U.S. 49 (1999); United States v. Irvine, 511 U.S.

224 (1994); United States v. National Bank of Commerce, 472

U.S. 713 (1985); United States v. Rodgers, 461 U.S. 677 (1983)

and Tyler v. United States, 281 U.S. 497 (1930).

However, the Respondent relies on some of the same

Supreme Court cases for the holding that state law determines

the nature of legal interest a taxpayer has in property. Bank of

Commerce, 472 U.S. at 722, citing Aquilino v. United States,

363 U.S. 509, 513-514 (1960) and Morgan v. Commissioner,

309 U.S. 78, 82 (1940). “Federal statute “creates no property

rights but merely attaches consequences, federally defined, to

rights created under state law.” Bank of Commerce, 472 U.S. at

722, citing United States v. Bess, 357 U.S. 51, 55 (1958). Those

consequences are then left to Federal law to determine. Bank of

Commerce, 472 U.S. at 722, citing Rodgers, 461 U.S. at 683.

Upon review, it becomes clear that all the cases relied upon

by the IRS are either in harmony with the Sixth Circuit decisions,

10

or are distinguishable. 7yler actually reviewed three lower court

cases, one relating to stock held as tenants by the entirety in

Maryland (something which Michigan does not permit) and

two cases concerning real property held as tenants by the entirety

in Pennsylvania. Tyler, 281 U.S. at 499-500. The distinguishing

factor in Tyler is that the Court was faced with a tax statute that

specifically included tenancy by the entireties interests in a

decedent’s estate. /d. at 500-501. Interestingly, the decision reached

by the 7yler Court and the underlying basis for it, mirror the result

in this case below. Justas the lower Courts in Craft have held, the

Court in Tyler held that it would not allow a tenancy created with

the funds of one, to be unfairly shielded from that individual’s

taxing creditors. /d at 501-504. Even as the IRS holds out Tyler as

an example of a prior decision of this Court finding that state law

“fictions” do not prevent the exercise of tax enforcement, that

correct in this case: “[{t]hese decisions establish a state rule of

property, by which, of course, this court is bound.” /d at 501, citing

Warburton v. White, 176 U.S. 484, 496 (1900).

The petition United States v. Rodgers for the proposition

that “state-created exemptions” are ineffective against federal

tax liens. What that argument fails to recognize is the distinction

between state-created exemptions, and state law definitions of

property. Even Rodgers in its discussion on legislative history

and entireties cases stated, “[those cases] do no more than

illustrate the proposition that, in the tax enforcement context,

federal law governs the consequences that attach to property

interests, but state law governs whether any property interests

exist in the first place.” Rodgers, 461 U.S. at 702-703 n.31

(1992). Such a statement could not be clearer.

The Respondent asserts that Bank of Commerce actually

supports her position. While that case includes the quote cited

by the IRS petition stating that “(t]he question whether a state-

law nght constitutes ‘property’ or ‘rights to property’ is a matter

of federal law” Bank of Commerce, 472 U.S. at 727, the IRS

has been unable to refute the holding that, “the federal statute

‘creates no property nghts but merely attaches consequences,

11

federally defined, to rights created under state law.’ ” /d. at 722

(1985), quoting Bess, 357 U.S. at 55.

The IRS in its petition cites to the /rvine case for the

proposition that Federal law is not “struck blind” by state law

fictions concerning the ownership of property. In /rvine, the

Court was faced with a taxpayer who was the beneficiary of a

trust created by her grandfather. There was no question in that

case that the individual taxpayer owned and possessed a present

right or property interest in that trust, at the time it was created.

The /rvine Court then examined whether a disclaimer of that

interest which was valid under Minnesota Law, prevented the

Internal Revenue Code from applying its gift tax provisions to

the transfer of interest. /rvine, 511 U.S. at 229-230.

Such analysis is inapplicable to the facts before the Court

in this case. In /rvine, the taxpayer owned a present property

interest and the Court was ruling on whether or not state law

permitting a disclaimer of that interest should be binding on

the IRS. In this case, Donald Craft never owned an individual

interest in the real property as that property nght is defined

under Michigan law. The /rvine holding regarding the failure

of a Minnesota state law allowing a disclaimer of an interest

admittedly done to prevent the application of the Internal

Revenue Code, contains no precedent on whether the IRS tax

lien attached to property in which Donald Craft held no

individual interest. The IRS would have this Court believe that

Irvine allows the federal tax lien to pierce all state law fictions

concerning property ownership. What <he IRS fails to

distinguish is that the state law in /rvine dealt with the

consequences of that state law fiction, rather than a state law

fiction part of the definition of property nghts in Michigan.

The petition also forwards the position that Drye, 528 U.S.

49 (1999) represents a “subsequent contrary view of the law by

a controlling authority.” The Drye opinion is nothing of the

sort. If anything, this Court in Drye has provided a “nutshell”

summary of all the leading cases prior to Drye relating to

attachment of federal tax liens and has moved the factors to be

considered even more in favor of the Respondent.

12

The Drye Court pointed out that in Bess it had previously

held, “that no federal tax lien could attach to [insurance] policy

proceeds unavailable to the insured in his lifetime.” Drye, 511

U.S. at 57; citing Bess, 357 U.S. at 55-56. The Court also stated,

albeit in dictum, that it did not “mean to suggest that an

expectancy that has pecuniary value and is transferable under

state law would fall within § 6321 prior to the time it ripens

into a presen? estate.” Drye, 511 U.S. at 57 n.7. By those

statements, this Court would seem to have once again indicated

that a present property interest as defined by state law must

exist prior to the attachment of any federal tax lien.

Such language by the Court supports the Sixth Circuit’s

prior holdings to the effect that the United States, whether

through its drug forfeiture statutes or its tax lien statutes, could

only proceed against an interest held in the property by the

criminal or delinquent taxpayer which remained after the

tenancy was terminated i.e., when the separate interest of that

individual ripened into a present possessory interest. See Leroy

Lane, 972 F.2d at 138; Craft, 140 F.3d at 642.

Even the Court’s reiteration in Drye of the statement that

federal tax law is not struck blind by state law fictions as recited

in /rvine, 511 U.S. at 240 represents no new change in controlling

authority. /d. at 53. Furthermore, the Drye decision has not

changed the law as applied by the lower court holdings in this

appeal. The previous holdings of this Court in Bess, Aquilino,

Bank of Commerce and Morgan, remain the same binding,

holdings issued by this Court which have been repeated ad

nauseum by the IRS in all its briefs in 1997, in all its briefs in

1999, and now in its petition.

Yet, the IRS in its petition, continues to attempt to have

this Court focus solely on caselaw that discusses “property”,

“rights to property” and the effect of the Internal Revenue Code.

What the IRS petition has not set forth is any credible caselaw

or statute refuting the voluminous binding precedent which

holds that “[s}tate law creates legal interests and right.”

Morgan, 309 at 80; Aquilino, 363 at 513; Bess, 357 U.S. at 56.

13

The pronouncement of this Court in Morgan was later reiterated

by the Aquilino Court where it stated,

The threshold question in this case, as in all cases

where the Federal Government asserts its tax lien,

is whether and to what extent the taxpayer had

“property” or “rights to property” to which the tax

lien could attach. In answering that question, both

federal and state courts must look to state law, for it

has long been the rule that “in the application of a

federal revenue act, state law controls in determining

the nature of the legal interest which the taxpayer

had in the property . . . sought to be reached by the

statute”. (Emphasis added).

Aquilino, 363 U.S. at 512-513. Citing Morgan, 309 U.S. at 82.

Therefore, the sole question for this Court to decide with

respect to the issue of whether the IRS tax lien attached to

tenancy by the entireties property in Michigan, is whether

Michigan substantive real property law has changed.

Voluminous Michigan caselaw representing over 100 years of

Michigan decisions have embraced the common law concept

of tenancies by the entireties being absolutely and completely

immune from the creditors of one spouse, except in cases of

fraud. Federal Court decisions interpreting those protections

afforded by tenancy by the entireties in Michigan, as well as

other states with similar common law, span nearly 50 years.

Those Federal decisions uniformly upheld the protections

inherent in a tenancy by the entireties until at least 1991.

The IRS has asserted throughout this litigation, that

Michigan real property law has changed, or been implicitly

changed by this Court’s recent rulings. The IRS has been unable,

however, to cite to any indication from any of the three bodies

legally able to effect such a change, the Michigan Legislature,

the Michigan Appellate Courts or the United States Congress.

14

Michigan law prior to 1991.

“In Michigan Real Property Law, tenancies by the entireties

enjoy an ancient and hoary tradition” Rogers, 136 Mich. App.

at 134. Tenancies by the entirety is a common law creation

which has existed in Michigan for over 120 years. The Michigan

Supreme Court stated as far back as 1885,

The interest William Beamer took with his wife was

a peculiar one. It was an entirety. Fisher v. Provin,

25 Mich. 347 [sic] (1872). They both took the same

estate, the same interest, and it could not be

separated. The right of the one was the right of the

other. Neither could by a separate transfer affect the

rights of the other or his own. What would defeat

the interest of one would also defeat that of the other.

(Cite Omitted) In a portion of these premises the

interest of William Beamer was more than that of a

joint tenant.

Vinton v. Beamer, 55 Mich. 559, 561 (1885).

The Michigan Supreme Court later clarified some of the

distinctions between a tenancy by the entireties and an ordinary

joint tenancy in 1891 when it stated, “The estate created by this

deed was not an estate in joint tenancy, but an estate in entirety.

A joint tenancy implies a seisin per my et per tout, while an

estate in entirety implies only a seisin per tout.” Appeal of Lewis,

85 Mich. 340, 341 (1891).

Recent Federal case law has explored the concept that each

spouse in a tenancy by the entireties holds a separate right of

survivorship, distinct to each spouse. Such a judicially-created

concepi does violence to prior Michigan precedent on that issue.

The Michigan Supreme Court released in 1918 the seminal case

on tenancy by the entirety in Michigan when it held,

It is urged by counsel for plaintiffs and appellants

that, before the death of either of the parties, each

holds an estate similar in some respects to that of a

contingent remainder, and that it has been held that

a contingent remainder is not subject to execution.

15

We think the better doctrine is that the nght of

survivorship is merely an incident of an estate by

entirety, and does not constitute a remainder, either

vested or contingent. Davis v. Clark, 26 Ind. 424

(1866); Shinn v. Shinn, 42 Kan. | (1889)....

Therefore, it has been quite universally held that an

estate by the entireties cannot be sold upon execution

on a judgment rendered against either the husband

or wife, because neither has any separate interest in

such an estate. (Emphasis added).

Sanford v. Bertrau, 204 Mich. 244, 248-249 (1918).

The Michigan Supreme Court later emphasized the fictional

unity of the husband and wife as one in 1936 when it stated,

It is conceded the defendants are tenants by the

entirety. Neither husband nor wife can sever such

tenancy. They do not hold by moieties but by

entireties. Neither can alienate a moiety so as to

defeat the title to the survivor. Husband and wife

take the estate as one person, and they take but one

estate. Palmer v. Treasurer and Receiver General,

222 Mass. 263, 110 NE 283 (1915).

Nurmi v. Beardsley, 275 Mich. 328, 330 (1936).

That same year the Michigan Supreme Court discussed the

scope of tenancy by the entireties characteristics again,

It is well settled under the law of this State that one

tenant by the entirety has no interest separable from

the that of the other, has nothing to convey or

mortgage or to which he alone can attach a lien.

Neither can incumber real estate held as tenants by

the entirety without the consent of the other. Each

is vested with an entire title and as against the one

who attempts alone to convey or incumber such real

estate, the other has an absolute title. (6 Michigan

Supreme Court citations omitted).

Long v. Earle, 277 Mich. 505, 517 (1936).

16

The District Court decision below held that, “At the time

that the joint conveyance was made, the entireties estate

terminated. At that point, each spouse took an equal half interest

in the estate and the government’s lien attached to Mr. Craft’s

interest.” Craft v. United States, 74 A.F.T.R.2d (RIA) 6362.

Such a decision runs directly contrary to previous Michigan

case law holding that a conveyance by one spouse in a tenancy

by the entireties, to the other spouse constitutes a “release” and

such a termination is allowed both by common law and by

Michigan statute. MCLA § 557.101.

The Supreme Court reiterated the ability of one spouse to

release their interest to the other in 1944 when it held,

As to the real estate, it satisfactorily appears from

the record that this parcel of real estate had been

held by John Paulus and his wife Elizabeth for many

years as tenants by the entirety and Paulus merely

quit-claimed to his wife whatever interest he had

therein. 3 Comp. Laws 1929, § 13069 (Stat. Ann.

§26.201); Ash v. Ash, 280 Mich. 198 (1937).

The validity of the quit claim deed is attacked by

plaintiff, but if it were set aside the title would again

be in the name of Paulus and his wife as tenants by

the entirety and plaintiff would not be aided thereby

because neither the land nor the rents in profit

therefrom would be subject to levy on execution for

the sole debt of the husband. American State Trust

Co. of Detroit v. Rosenthal, 255 Mich. 157 (1931).

Farrell v. Paulus, 309 Mich. 441, 444-445 (1944).

The concept and ability of one spouse terminating his or

her interest by releasing it to the remaining spouse was reiterated

again in 1952 by the Michigan Supreme Court when it stated,

“That the husband might have released his interest to the wife,

thereby vesting her with full and complete title, is not open to

question, Ash v. Ash, 280 Mich. 198, and prior decisions therein

cited. CL. 1948 §557.101 (Stat. Ann. §26.201).” Hearns v.

Hearns, 333 Mich. 423, 433 (1952).

17

The Michigan Supreme Court again revisited the scope of

tenancy by the entireties ownership in 1954 when it held,

An estate by the entirety is sometimes regarded as a

species of, or modified form of, joint tenancy, the

modification being rendered necessary by the

‘common-law theory that husband and wife are but

one person. The unities of time, title, interest, and

possession are common to both estates but in an

estate by entirety there is an additional unity, namely,

that of person. Strictly speaking, a tenancy by entirety

is not a joint tenancy but is a sole tenancy, and, while

the 2 estates resemble each other and possess some

qualities in common, yet they differ both in form

_ and substance and are distinguishable.

Budwit v. Herr, 339 Mich. 265, 272 (1954).

The Budwit court went on to restate the prior holding in

Sanford v. Bertrau, to the effect that the survivorship aspect of

a tenancy by the entireties is merely incident to the estate and

does not constitute a remainder of any kind, either vested or

contingent. Budwit, 339 Mich. 272-273.

The IRS took the position in the lower court that Michigan

real property law changed with the enactment of Public Act

288 of 1975, now clarified as MCLA § 557.71. That statute

was designed to equalize women’s rights in, as well as control

of tenancy by the entireties property, yet the IRS has taken the

position that it has created a separate interest in each spouse in

a tenancy by the entireties. Since that law’s enactment, however,

no Michigan case has construed that statute to reflect such a

change. To the contrary, Michigan courts since that time have

continued to uphold the long-standing concept of unity of

husband and wife as one, with neither spouse holding any rights

or interest separate from each other. That position was again

restated in 1984 by the Michigan Court of Appeals when it

held,

In a true tenancy by the entireties, each spouse is

considered to own the whole and, therefore, is

18

entitled to the enjoyment of the entirety and to

survivorship. When real property is so held as tenants

by the entireties, neither spouse acting alone can

alienate or encumber to a third person an interest in

the fee of lands so held. Neither the husband nor the

wife has an individual, separate interest in entireties

property, and neither has an interest in such property

which may be conveyed, encumbered or alienated

without the consent of the other. One incident of an

estate by the entireties is that the survivor, whether

husband or wife, is entitled to the whole and such

right cannot be defeated by a conveyance by one

spouse to a stranger.

Rogers, 136 Mich. App. at 134-135.

The following year, the Court of Appeals specifically

rejected the position taken by the IRS at the lower court.

The Court of Appeals ruled on an assertion by a creditor that

the enactment of 1975 Public Act 288 legislatively overruled

the common-law provision that rents obtained from tenancy by

the entireties properties were not subject to garnishment by the

creditors of one spouse. That court provided insightful guidance

not only as to the effect of the enactment of that Statute, but

what would be required to change Michigan real property law.

Plaintiff cites MCL §557.71; MSA §26.210(1),

adopted in 1975, for the proposition that the

Legislature has overruled the common-law provision

that rents from properties by the entireties are not

subject to garnishment by one spouse’s creditor.

That statute provides:

A husband and wife shall be equally entitled to

the rents, products, income or profits, and to the

control and management of real or personal property

held by them as tenants by the entirety.

Again, however, plaintiff cites no cases which

have construed the statute in such a way and we

decline to do so. The effect of the statute is merely

19

to modify the common-law rule that a husband had

absolute control over property held by the entireties

and the rent derived therefrom. To the extent that

the material appended to plaintiff's brief constitutes

legislative history, that legislative history does not

support plaintiff's interpretation. * * * We cannot

read into the statute an intent to extinguish the estate

by the entireties or to make an estate by the entireties

or its rent subject to garnishment by the creditors of

one spouse.

If, as argued by plaintiff, the estate by entireties

has outlived its usefulness and should be abolished,

it is up to either the Legislature or the Supreme Court

to make that determination. The last statements on

this issue by the Legislature and by the Supreme

Court have recognized the existence of an estate by

the entireties. This Court is bound by those

determinations.

SNB Bank & Trust v. Kensey, 145 Mich. App. 765, 776-777

(1985).

The last Michigan case that Respondent cites to this Court

to is the 1990 Supreme Court decision in Albro v. Allen,

434 Mich. 271 (1990). This case is important in that the

Michigan Supreme Court specifically discussed joint tenancies

with a right of survivorship and the ability of one joint tenant to

partition the estate, transfer his or her interest, and do so without

effecting a recognized, separate right of survivorship. This case

only serves to highlight the difference, by definition and

function, between a tenancy by the entireties in Michigan and a

joint tenancy with rights of survivorship.

Federal law prior to 1991.

The Federal Court decisions interpreting the protections

offered by tenancy by the entireties in Michigan likewise

represent a long history of case law upholding the inability of

creditors of one spouse from attaching, liening, or executing

against tenancy by the entireties property for one spouse’s debts.

20

While the rule in a number of states is to the

contrary, the Supreme Court of Michigan has

consistently aligned itself with what appears to

be the majority rule to the effect that no portion

of an estate by the entireties may be subjected to

a lien for the individual indebtedness of either

spouse. Vinton v. Beamer, 55 Mich. 559 (1885);

Dickey v. Converse, 117 Mich. 449 (1898);

Schliess v. Thayer, 170 Mich. 395 (1912); Turner

v. Davidson, 227 Mich. 459 (1924).... In the

enforcement of the taxing laws of the United

States, the Federal Courts, in determining the

extent of a taxpayer’s property interest in real

estate, are bound by state rules of property.

Poe v. Seaborne, 282 U.S. 101 (1937).

Shaw v. United States, 94 F. Supp. 245, 246 (W.D. Mich.

1939).

The Sixth Circuit discussed the characteristics of

Michigan tenancy by the entireties ownership in a 1940

decision,

The nature of such estates prevents their sale or

disposal, or any part thereof, by either the husband

or the wife without the assent of both. The whole

remains to the survivor. Neither can convey,

encumber or at all prejudice such estates without

the consent of the other. The unity of the husband

and wife as one person and the ownership of the

estate by that person prevents the disposition of

it otherwise than jointly.

Schram v. Burt, 111 F.2d 557, 561 (6th Cir. 1940).

The Burt Court had previously pointed out distinctions

which recent decisions seemed to gloss over. “Their genesis

lies in the maxim ‘man and wife are as one person.” As a

consequence of this relationship, many incidences flow

therefrom quite different from those arising from a joint tenancy

or any other form of co-ownership.” Burt, 111 F.2d at 561.

21

The peculiar nature of the protections afforded by a

tenancy by the entireties in Michigan was again addressed

by U.S. District Court in Michigan when it stated in 1945,.

We find no designation in the Federal Revenue Act

by which a tax may be imposed upon property held

by the entirety for taxes due from the husband alone.

Michigan decisions covering property by entirety

follow the common law and have withstood the

onslaught of creditors for years. Neither the husband

nor the wife has an individual, separable interest in

entirety property. Neither can convey an interest

without the aid of the other. Neither husband nor

wife can sever the tenancy. They take the estate as

one person and they take but one estate.

United States v. Nathanson, 60 F. Supp. 193, 194 (E.D. Mich.

1945), citing seven Michigan Supreme Court cases.

The Sixth Circuit again visited the issue of Michigan

tenancy by the entireties ownership in 1959 when it stated,

A tenancy by the entirety in real property is an estate

in land accruing to the husband and wife wherein

both are seized of the entirety so that neither can

dispose of any part without the consent of the other,

nor may either subject it to payment of his or her

individual debts * * * It is described as “a peculiar

and anomalous estate.” Each (husband and wife) is

seized per tout et non per my; there is but one estate.

Whether or not an estate by the entirety has been

created in property depends on state law.

Fetter v. United States, 269 F.2d 467, 469 (6th Cir. 1959).

In Fetter, the Sixth Circuit went on to cite an earlier

U.S. District Court of Michigan decision discussing the

characteristics of tenancy by the entireties ownership stating,

* * * but the sitle itself to the property held by such

an estate is not capable of division into separate

interests, undivided or otherwise, but is one

“entirety,” entirely owned by each tenant. There is,

22.

therefore, in such a tenancy, no title owned by one

of such tenants, and no “property which prior to the

filing of the petition he could by any means have

transferred, or which might have been levied upon

23

that Michigan substantive real property law has changed,

the only difference between the Cole case and that of

Mrs. Craft, is the dates and the names, at least as to the issue

of whether the tax lien attached at the moment it was filed

and sold under judicial process against him,”. . . . by the IRS.

Fetter, 269 F.2d at 470, citing McMullen v. Zabawski, 283 Based on the duplication of facts between Cole and that

F. 552, 556 (E.D. Mich. 1922). of Sandra Craft during the tenancy by the entireties, it is

The protections inherent in a tenancy by the entireties in important to revisit the language of the Sixth Circuit

Michigan were central to another decision by the U.S. District concerning the attachment of a Federal tax lien to tenancy

Court in Michigan in 1963. That Court held that, by entireties:

Under Michigan law, neither the husband nor the

wife has an individual, separate interest in entirety

property, United States v. Nathanson, supra; Long

v. Earle, supra; Vinton v. Beamer, supra; and neither

has an interest in such property which may be

conveyed, encumbered or alienated without the

consent of the other. Schram v. Burt, supra; French

v. Foster, 307 Mich. 361 (1943); Arrand v. Graham,

297 Mich. 559 (1941); Long v. Earle, supra; Hearns

v. Hearns, supra; Schulz v. Silver, 323 Mich. 454

(1949). One incident of an estate by the entirety is

that the survivor, whether husband or wife, is entitled

to the whole, and such right cannot be defeated by a

conveyance by one spouse to a stranger.” Guldager

v. United States, 204 F.2d. 487 (6th. Cir. 1953); Lilly

v. Schmock, 297 Mich. 513 (1941); Detroit &

Security Trust Co. v. Kramer, 247 Mich. 468 (1929).

McLean v. United States, 224 F. Supp. 726, 728-729 (E.D. Mich.

1963).

The Sixth Circuit then issued the seminal opinion of Cole

v. Cardoza in 1971. That case, simply put, is “on all fours”

with the present case. Just as in Mrs. Craft’s case, the Cole

Court was called upon to determine whether a federal tax lien

filed only against the husband based on taxes owed by the

husband alone, could attach against tenancy by the entireties

property owned in Michigan. Unless the IRS can demonstrate

This issue involves two questions. Does the

Federal tax lien attach to the above named

property? If not, does it constitute a cloud on the

title to the property such that the appellants are

entitled to have it removed? In answering both

questions, we look to the law of Michigan which

governs the property rights of the taxpayers.

United States v. Durham Lumber Co., 363 U.S.

522 (1960); Aquilino v. United States, 363 U.S.

509 (1960).

The Government concedes that under

Michigan law it has no valid claim against the

home of the appellants. Shaw v. United States,

94 F.Supp. 245 (W.D. Mich. 1939); see United

States v. Nathanson, 60 F.Supp. 193 (E.D. Mich.

1945). In Michigan tenants by the entirety hold

under a single title. Neither spouse has the power

without the concurrence of the other to alienate

the estate or any interest therein, and neither the

land nor the rents and profits therefrom are subject

to levy or execution for the sole debts of the

husband. Farrell v. Paulus, 309 Mich. 441, 445

(1944). Thus, in the present situation, the federal

tax lien does not attach to the subject property

owned by Eugene and Mary Cole by the entirety,

because the Government’s tax lien is against

24

Eugene Cole only. If the lien constitutes a cloud on

the title to that property, appellants are therefore

entitled to have the lien declared a nullity as to the

property. (Emphasis added).

Cole v. Cardoza, 441 F.2d 1337, 1343 (6th Cir. 1971).

The ruling of the Sixth Circuit is pristinely clear and

remarkably applicable to Ms. Craft’s case. The tax lien for

Donald Craft only did not attach to tenancy by the entireties

property in Michigan prior to the termination of the tenancy.

The Sixth Circuit again discussed tenancy by the entireties

protections in 1985. The Court decided a case dealing with the

converse of whether a creditor of one spouse could reach

entireties property, that is, whether joint creditors of both

spouses could reach tenancy by the entireties property. The Sixth

Circuit reiterated previous positions dealing with the peculiar

characteristics of tenancy of the entireties property.

Michigan is among the minority of states retaining

the common law tenancy by the entirety. Tenants

by the entirety, who must be husband and wife, hold

under a single title with right of survivorship. Neither

husband nor wife acting alone can alienate any

interest in the property, nor can the creditors of one

levy upon the property; but their joint creditors can

reach entireties property. See Sanford v. Bertrau,

204 Mich. 244 (1918).

* * * Under Michigan law, ordinary creditors cannot

reach interests in entireties property, and the entire

interest will therefore be exempt if there are no joint

creditors. Joint creditors, however, can reach the

entireties interest, subject only to the $3,500

homestead exemption in Mich.. Const. art. 10, § 3.”

In the Matter of Grosslight (Liberty State Bank and Trust v.

Grosslight), 757 F.2d. 773, 775-776 (6th Cir. 1985).

The Sixth Circuit again had the opportunity to revisit

tenancy by the entireties ownership in Michigan in the very

case that the Internal Revenue Service asserts stands for the

25

proposition that Michigan law concerning tenancy by the

entireties contains a separate right of survivorship in each

spouse, which therefore can be attached by the Federal tax lien.

Such a position, however, directly contradicts the clear and

unequivocal language of the Sixth Circuit in that case.

Under Michigan law, entireties property may be

levied upon by the State for nonpayment of real

estate taxes on the real property itself. See Robbins

v. Barron, 32 Mich. 36 (1875). However, entireties

property may not be attached to satisfy the personal

tax liability of a single spouse. Cole v. Cardoza,

441 F.2d at 1343; United States v. Nathanson, 60

F.Supp. 193 (E. D. Mich. 1945).

Leroy Lane I, 910 F.2d at 350.

The Sixth Circuit again revisited its treatment of tenancy

by the entireties property when that same case came before at a

second time in 1992. The Court stated at that time that the

Government was precluded from obtaining the husband’s

interest in the tenancy by the entireties property, unless the wife

predeceased him, there was a divorce, or the entireties estate

was jointly conveyed and that the Government’s interest in the

property was most analogous to the position of a judgment

creditor under Michigan law. Leroy Lane I], 972 F.2d at 137

The Court went on to clarify its previous ruling:

The government argues that by virtue of the federal

forfeiture statute and our prior opinion in this case,

they stepped into Mitchell Marks’ place and

therefore, should receive one-half of the property.

We disagree. As we stated in our prior opinion, the

federal forfeiture statutes do not operate to destroy

the fundamental characteristics given to real property

by the states. See Certain Real Property, 910 F.2d

349. To allow the United States to step into Mitchell

Marks’ place as a tenant by the entirety would

destroy the tenancy by the entirety because the

unities of time, title, and person would be violated.

26

The government did not and could not possess

Mitchell Marks’ present interest in the tenancy by

the entirety. The government’s interest comes into

being only when the tenancy by the entireties is

destroyed either by death, divorce, or operation of

Michigan law. When the tenancy by the entireties

is destroyed, the government gets whatever Mitchell

Marks possesses after the entireties estate is

destroyed. In this case, by virtue of the divorce

court’s distribution of the property, Mitchell was

left with no part of the property.

Leroy Lane II, 972 F.2d at 138.

Specifically, what the Sixth Circuit did not state was that

the Government possessed Mitchell Marks’ right to survivorship

by virtue of the application of the drug of forfeiture statute, a

statute which unquestionably provides the United States with

greater and more far reaching powers against an individual’s

property than does the Internal Revenue Code. What the Sixth

Circuit did state was that the Government could only get

whatever interest the husband possessed after the entireties

estate was destroyed. Just as in the Leroy Lane cases, after the

tenancy by the entireties was destroyed, the husband here was

left with no part of or claim to the property. In Leroy Lane,

however, the Sixth Circuit was concerned that the United States

had not been afforded the opportunity to represent its claim to

an interest in that entireties estate before the divorce court.

In the present case, however, the IRS not only had actual

notice of Don Craft’s Chapter 7 bankruptcy, but was actively

involved in an adversary proceeding in that bankruptcy on the

exact issue before this Court. Further, the IRS was actively

negotiating an escrow agreement which allowed the sale of the

property held as tenancy by the entireties to be closed in June

of 1992, pending discussions and/or litigation between the

parties as to the attachment of the tax lien. The IRS could have

pursued their nghts to claim an interest in this property held as

27

tenants by the entirety during Don Craft’s bankruptcy. The IRS

chose not to do that and instead relied on its assertion that its

tax lien against Don Craft alone attached to his interest in the

tenancy by the entireties property despite that position being

contrary to all relevant case law.

What has Changed?

Voluminous Michigan precedent for more than 100 years,

as well as a significant number of Federal cases addressing

Michigan tenancy by the entireties, clearly stand for the

proposition that neither tenant in an entireties estate owns or

possesses any separate right, including a right to survivorship,

that is capable of being alienated, transferred, levied, garnished

upon, or subjected to a creditor’s lien. The question then

becomes what has changed in Michigan real property law to

support the Petitioner’s argument?

The Respondent would answer unequivocally, “Nothing!”

Given the fact that tenancy by the entireties is a common-law

creation of Michigan real property law, there are three entities

that properly have the power and authority to change what is

current law in Michigan. The first would be the Michigan

legislature by simply deciding that the concept of tenancy by

the entireties needs to be codified, or in the alternative, has

outlived its usefulness and some statute needs to be passed to

replace or reject or eliminate that concept. The second entity

which could change tenancy by the entireties law is the Michigan

Appellate Court system. Either the Michigan Court of Appeals

or the Michigan Supreme Court could, by its rulings change,

modify or outright eliminate tenancy by the entireties in

Michigan. The last entity which legally could change the concept

of tenancy by the entireties ownership in Michigan would be

the United States Congress by amending any number of Federal

statutes and specifically modifying or eliminating the

protections afforded by tenancy by the entireties ownership.

Absent some indication by one of those three entities that

the substantive real property law concept of tenancy by the

28

entireties ownership has changed, it is inappropriate for a Federal

Court to determine that substantive Michigan real property law

should be changed, altered or eliminated.

The Michigan legislature has not taken any action

specifically or impliedly to change, alter or eliminate those

protections encompassed by tenancy by the entireties ownership

which are at issue in this case. The position taken at trial by the

IRS was that 1975 Public Act 288 created a separate interest in

each spouse. That is simply an incorrect statement of the law

and has been rejected by the Michigan Court of Appeals in

SNB Bank & Trust, 145 Mich. App. 765, as discussed above.

The Michigan Appellate courts have likewise not indicated

by their rulings, any change in the protections afforded by

tenancy by the entireties ownership since that statute in 1975,

or since this Court’s 1971 Cole v. Cardoza ruling. To the

contrary, the rulings of Rogers in 1984, SNB Bank & Trust in

1985, Tamplin v. Tamplin in 1987 and Albro v. Allen in 1990

represent a continuing pattern of cases upholding the continued

vitality of tenancy by the entireties protections in Michigan.

Lastly, the United States Congress could pass various

legislation which would modify, curtail or eliminate those

protections afforded spouses in Michigan under tenancy by the

entireties ownership. Section 522(b)(2)(B) of Title 11, the

Bankruptcy Code separate specifically provides for the

continuing recognition of the status provided by tenancy by the

entireties ownership. Congress could have eliminated such a

protection from its exemption scheme for Federal bankruptcy

purposes, but instead has continued to recognize that concept

through at least five significant reforms and amendments.

The Respondent respectfully asserts that none of the three

entities properly able to change the concept of tenancy by the

entireties ownership in Michigan have done so and that this

Court should therefore deny Petitioner’s petition for certiorari.

29

E. This case does not have such far-reaching implications

or compelling reasons as to merit granting certiorari to

review multiple decisions of the Sixth Circuit.

There is no conflict between the Circuits that would suggest

a need for this Court to grant certiorari on the issue presented

in the petition. The IRS has not offered, much less demonstrated

at any lower court, that this decision affects the residents of

any other State other than taxpayers in the State of Miciigan.

The Petitioner would have this Court believe this case has

far-reaching implications of a most compelling nature because

of what it believes is the creation of an “easy avenue for tax

avoidance”. The IRS defers attention from the fact that this

case only reaffirms the long-standing legal holding and principle

of Cole v. Cardoza, 441 F.2d 1337, 1343 (6th Cir. 1971). Despite

no less than three evidentiary hearings before the District Court

in this case, the IRS has never presented any factual evidence

whatsoever of another taxpayer, even in Michigan, who has

availed themself of this supposedly “easy avenue for tax

avoidance” despite this legal principle being the status quo in

federal court in Michigan for a minimum of sixty years, and in

Michigan courts for over 100 years.

The IRS continues throughout this litigation to make

representations to the Court about facts not in evidence. Now

for the first time the IRS would have this Court consider what

it states without any support, to be statistics concerning the

effects of tenancy by the entireties on married taxpayers’

delinquency rates in Michigan. (Petitioner’s brief, n.7, p. 11)

The Petition continues with an additional argument

concerning the Michigan statutory definitions of joint tenancies,

and the alleged future interests included therein (Petition,

pp. 12-13), repeating an argument made for the first time at

oral argument before the Sixth Circuit on August 10, 2000. It is

black-letter law that a party cannot raise an argument for the

first time on appeal and the IRS should be barred from making

its argument over the statutory definitions of joint ownership

30

for failing to raise it at any prior trial. Helvering v. Wood, 309

U.S. 344, 349 (1940); Burnet v. Commonwealth Improvement

Co., 287 U.S. 415, 418 (1932).

The Petition continues to represent to the Court

that certiorari should be granted because the decisions of the

Sixth Circuit conflict with controlling decisions of this Court.

That very argument was rejected by the Sixth Circuit no less

than four times, twice by vote of the entire panel of judges on

the Sixth Circuit.' As discussed in the preceding section, that

recurring statement by the IRS reflects analysis and conclusions

that are simply inaccurate and misleading.

The well-reasoned decisions of the Sixth Circuit Court of

Appeals correctly apply the controlling precedent of this Court

with respect to the issue of state law property rights. This Court

should not disturb the Court of Appeals’ findings which are not

in any manner repugnant to any prior holding of this Court.

CONCLUSION

The petition for writ of certiorari should be dismissed or

denied as unnecessary for the all reasons stated above.

Respectfully submitted,

JEFFERY A. MOYER

STENGER & STENGER, P.C.

Attorneys for Respondent

4095 Embassy Drive, SE

Grand Rapids, MI 49546

(616) 940-1190

1. The Sixth Circuit rejected that exact argument by the IRS in

the Craft ] decision released on April 1, 1998; it rejected that argument

again as part of the unanimous vote to deny a petition for hearing

en banc in December, 1999; it rejected that argument again at oral

argument and as indicated in the Craft I] decision released on November

22, 2000; and it rejected that argument for a fourth time by majority

vote of the judges on the Court in denying a petition for rehearing

en banc on March 16, 2001.