United States v. Carole F. Librizzi

EVANS, Circuit Judge,

dissenting.

My colleagues find Ms. Librizzi’s contention that the federal tax lien extends only to the value of the property at the time of her husband’s death to be an “odd notion.” If it is odd, it is not the first, nor will it be the last, odd notion to grow out of what a legislature has done.

As the court correctly notes, we must look to Wisconsin law to evaluate Ms. Librizzi’s claim. There we find that joint tenancy is different from other types of co-ownership, and survivorship is a concept with considerable force, as Musa v. Segelke & Kohlhaus Co., 224 Wis. 432, 272 N.W. 657 (Wis.1937) illustrates. If Musa were all Wisconsin had to say on the subject, we would have to conclude that the IRS lien was extinguished altogether upon Mr. Librizzi’s death. The result in Musa is part of the court’s recognition of the special nature of a joint tenancy, in which upon the death of one joint tenant the survivor becomes the “sole and absolute owner of the property, and there consequently exists no longer any interest or property right whatsoever in the deceased joint tenant or his estate.” 224 Wis. at 436, 272 N.W. 657. Musa also tells us that in the absence of a severance of the joint tenancy, “there remains no interest or property right in a deceased joint tenant or his estate upon his death....” Id. Joint tenancy then presents a unique situation — one in which the usual rule that a lien follows the property does not hold true under the common law.

However, as my colleagues also point out, Musa is not the last word in Wisconsin law. Section 700.24, Wisconsin Statutes, enacted some 8 years after Musa, provides that some liens are not extinguished upon the death of *140a joint-tenant/debtor. State tax liens are among those which are not extinguished, and for that reason Ms. Librizzi does not argue that the federal tax lien is extinguished. But what is the lien attached to?

On this point, I acknowledge that the statute is not as clear as a bell. But if it is read in light of Wisconsin joint tenancy law, it seems to me that Ms. Librizzi should win this case.

To back up a moment, there is a difference between a transfer of an interest in a joint tenancy either by sale or through court order upon a divorce and the transfer of ownership which occurs through survivorship upon the death of a joint tenant. See, e.g., Eloff v. Riesch, 14 Wis.2d 519, 111 N.W.2d 578 (1961); Wozniak v. Wozniak, 121 Wis.2d 330, 359 N.W.2d 147 (1984). The former severs the joint tenancy and consequently eliminates survivorship; the transfer of interest is like the sale of any other property. In that case, the seller receives the value as of the moment of the sale and the buyer receives the property subject to any lien which may exist on the property. If Mr. Librizzi had found a buyer for his interest in the property, that incredibly foolish fellow would have taken title subject to a huge federal tax lien. The lien would follow the property and become the problem of the buyer, and the value of Mr. Librizzi’s interest would never be more than it was at the moment of the sale. In contrast, in the transfer of ownership through joint tenancy, absent a statute such as § 700.24, the lien is extinguished, and the survivor takes all. In short, obtaining property through survivorship is different from buying it.

Section 700.24 both affirms the right of survivorship and somewhat limits it. The surviving tenant takes “the interest such deceased joint tenant could have transferred prior to death subject to such ... statutory lien.” Notably, the statute does not say simply that the surviving tenant takes the interest of such deceased joint tenant subject to the lien. It is the interest the deceased “could have transferred prior to death.” It does not seem to me to be unduly odd to say that “prior to death” was put in the statute for a reason, and the reason is to limit the reach of the lien in the case of a transfer of ownership through survivorship. The lien attaches to the value of the interest in the property “prior to death”; that value is, after all, what could have been transferred. Reading the statute this way is consistent, I believe, with the often repeated statement regarding joint tenancy that after death neither the deceased nor his estate has any interest whatsoever in the property.

Under this reading of the statute the IRS’s interest in the property is worth less when the ownership is transferred under survivor-ship than it would have been if, while still alive, Mr. Librizzi transferred his interest to Ms. Librizzi and severed the joint tenancy. The statute, I think, tries to strike a balance between the rights of survivors and the rights of lien holders, sustaining' the lien but putting a limit on the damage it can inflict on a survivor. For these reasons, I would find in favor of the innocent widow Librizzi and affirm the judgment of the district court.