Jane V. Frein, Citimortgage, Inc., successor in interest to Citibank, Federal Savings Bank, and Ocita Neighborhood Association, Inc., Defendants, Hunters Creek Community Association, Inc., Consolidated Defendant, 2005-1 USTC (D.C. Mid. Dist. Fla., Orlando Div., February 15, 2005).
“According to the Code, “The court, … in all cases where a claim or interest of the United States … is established, may decree a sale of such property, by the proper officer of the court.” 26 U.S.C.A. § 7403(c) (Emphasis added). The language of the statute has been interpreted to provide some discretion to refuse to permit foreclosure, however, such discretion is very limited and should be exercised “rigorously and sparingly.” United States v. Rodgers [ 83-1 USTC ¶9374], 461 U.S. 677, 710-11, 103 S.Ct. 2132, 215-52, 76 L.Ed.2d 236, 263-64 (1983). In Rodgers, the Supreme Court set forth four factors to be considered in making that determination. First, a court should consider 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. Second, a court should consider whether the third party with a nonliable separate interest in the property would, in the normal course of events, have a legally recognized expectation that the separate property would not be subject to forced sale by the delinquent taxpayer or his or her creditors. Third, a court should consider the likely prejudice to the third party, both in personal dislocation costs and in practical undercompensation. Fourth, a court should consider the relative character and value of the nonliable and liable interests in the property. Id.
“As for the first factor, here, the property in question is a residence, currently occupied by non-debtor, Mrs. Frein. There is no evidence that the property is susceptible to physical partition and the Court doubts that there is a market for a partial interest in a residence, where the co-tenant is in possession. A partial sale is not feasible. The second factor, Mrs. Frein’s expectations, are less clear. While she states that she had a legitimate expectation that the property would not be subject to forced sale, in view of the pending mortgage foreclosure suit, the legitimacy of that expectation is in doubt. Whether by tax lien foreclosure or by mortgage foreclosure, Mrs. Frein’s days in residence appear to be numbered.
“While the first two factors weigh in favor of the Government’s interest in foreclosure, the last two factors are undeveloped on this record. The Court has insufficient information to judge the value of the property compared with the amount of the liens and thus cannot determine any issue of undercompensation to the non-debtor. Similarly, the Court has insufficient information regarding whether there are other assets available to satisfy the lien or cushion any dislocation costs, nor is the Court able to adjudicate the relative equities between the debtor and the non-debtor, with respect to this property. Considering that the Government has not presented specific evidence sufficient to fulfill the Court’s duty to “determine the merits of all claims to and liens upon the property” including those held by the mortgage company, the Court recommends that the motion to order a foreclosure sale be deferred until further development of the record with respect to Mrs. Frein’s interest and that of all other claimants or lienholders. Although Mrs. Frein contends that an evidentiary hearing is necessary, such a request is premature at this point. The Court finds only that the record is presently insufficient to warrant summary judgment of foreclosure in favor of the United States.
“For the reasons set forth above, the United States’ motion is premature to the extent it seeks an Order of Foreclosure prior to determining the amount of all other claims and liens against the property. To the extent the motion seeks to reduce the tax liabilities, as reflected in the Certificates of Assessment, to judgment, the motion is well taken. Therefore, it is respectfully recommended that the motion be granted, in part, and denied, without prejudice, in part, as set forth above.”