United States District Court, D. South Dakota, Southern Division
ORDER DENYING MOTION FOR RECONSIDERATION
LAWRENCE L. PIERSOL UNITED STATES DISTRICT JUDGE.
8, 2018, a hearing was held to determine Beverly Nelson's
interest, if any, in the real property listed in the
Complaint. The United States appeared by counsel, Natalie
Loebner. Defendants Jeffrey Nelson, Beverly Nelson and the
Minnehaha County Treasurer's Office did not appear in
person or by counsel. The United States submitted evidence
showing that Jeffrey Nelson holds title to the property. The
United States admitted that, for purposes of these
proceedings, Beverly Nelson is a non-delinquent taxpayer.
conclusion of the May 8 hearing, the Court ordered the United
States to submit a brief regarding the issues whether South
Dakota law provides Beverly Nelson with an interest in the
subject property, including a homestead interest, and whether
her interest, if any, would prohibit foreclosure on the
property or would entitle Beverly Nelson to some proceeds
from sale of the property. (Doc. 36.) The Court directed the
United States to include an analysis of the Rodgers
factors. See United States v. Rodgers, 461
U.S. 677, 710-11 (1983).
14, 2018, the United States submitted its post-hearing brief.
(Doc. 37.) The United States agreed that Beverly Nelson has a
homestead interest in the property and admitted that her
possessory interest in the property should be considered by
the Court in deciding whether to allow a forced sale of the
property under 26 U.S.C. § 7403. The United States
argued, however, that Beverly Nelson should not be
compensated for the loss of her homestead interest because,
under South Dakota law, a homestead interest is not a vested
25, 2018, after analyzing the factors set forth by the
Supreme Court in Rodgers, this Court ruled that the
United States should be allowed to force a sale of the
property. (Doc. 40.) The ruling was based in large part on
the determination that Beverly Nelson could be fully and
fairly compensated for the loss of her homestead interest out
of the proceeds of the sale. The Court directed the parties
to submit briefs regarding the value of Beverly Nelson's
homestead interest, and recommendations for distribution of
the proceeds from the sale.
the United States filed the pending motion for
reconsideration. (Doc. 41.) The United States argues that
Beverly Nelson is not entitled to any compensation for her
homestead interest because it is not a vested property right.
United States attempts to distinguish Rodgers by
arguing that the non-delinquent spouse's interest in
Rodgers was compensable out of sale proceeds because
it was a vested property right under Texas law, but Beverly
Nelson's homestead interest is deemed a privilege under
South Dakota law and not a vested property right. Thus,
unlike in Rodgers, Beverly Nelson is not entitled to
compensation for her homestead interest. (Doc. 42 at 3-4.)
Having closely scrutinized Rodgers, this Court
Rodgers, the government filed suit under 26 U.S.C.
§ 7403(a) to foreclose its lien on the delinquent
taxpayer's property, and his wife argued foreclosure
could not occur because she continued to hold a homestead
interest in the property. Rodgers, 461 U.S. at
687-88. The Fifth Circuit ruled that the United States could
not foreclose tax liens against homestead property "for
as long as the nontaxpayer spouse maintains his or her
homestead interest under state law." United States
v. Rodgers, 649 F.2d 1117, 1125 (5th Cir.1981) (footnote
omitted). The Supreme Court reversed, and held that: (1)
federal tax liens may attach to property that cannot be
unilaterally alienated; (2) § 7403 allows the government
to seek, and the district court to order, the judicial sale
of such property; and (3) if the property is sold, the
nondelinquent spouse must receive complete compensation of
her interest from the proceeds of the sale. Rodgers,
461 U.S. at 680.
law governs whether a property interest exists but
"federal law governs the consequences that attach to
property interests." Rodgers, 461 U.S. at 702
n. 31. Rodgers discusses state homestead law, which
happened to be Texas law in that case. The Court concluded
that the effect of provisions in the Texas Constitution
"is to give each spouse in a marriage a separate and
undivided possessory interest in the homestead, which is only
lost by death or abandonment, and which may not be
compromised either by the other spouse or by his heirs."
Id. at 685. Noting that analogies are "somewhat
hazardous in this area," id. at 685-686, the
Court stated that the Texas homestead laws have the effect of
reducing the underlying ownership rights in a homestead
property to something akin to an undivided life estate in the
property." Id. at 686. "[T]he Texas
homestead right is not a mere statutory entitlement, but a
vested property right." Id. "As the
Supreme Court of Texas has put it, a spouse 'has a vested
estate in the land of which she cannot be divested during her
life except by abandonment or a voluntary conveyance in the
manner prescribed by law." Id.
Dakota homestead laws have the same effect as Texas homestead
laws, giving both spouses an independent interest in the
homestead property. The South Dakota Supreme Court has
described the nature of the homestead interest:
The land in which the owner has a homestead interest may be
conveyed by deed or pass by will, or under the statutes of
succession. But the homestead interest does not pass as an
incident to the land; and, if the party acquiring such
property becomes vested with a homestead interest founded on
the title so obtained, it vests by reason of possession and
use and occupancy as a homestead, under the general statute.
The source of the title is immaterial.
[T]he Legislature, in effect, has said that neither the
deceased spouse nor the adult heirs shall deprive the
surviving spouse of a homestead right in what had formerly
been the family homestead. Yet it leaves to the surviving
spouse the power to determine whether or not such homestead
right shall be retained or abandoned.
Gross v. Gross, 491 N.W.2d 751, 753 (S.D. 1992)
(quoting Bailly v. Farmers' State Bank of
Sisseton, 150 N.W. 942, 944 (S.D. 1915). "This
Court has also noted that 'the homestead law was passed
for the express purpose of making it impossible for the
husband, or the wife, if the title to the homestead is vested
in her, to alienate or otherwise dispose of the homestead
without the concurrence of the other spouse.'"
Gross, 491 N.W.2d at 753 (quoting O 'Neill
v. Bennett, 181 N.W. 97, 99 (1921); SDCL 43-31-9).
support of its argument that Beverly Nelson is not entitled
to compensation for her homestead interest, the United States
relies on language describing a South Dakota ...