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Eleventh Circuit: Florida Real Estate Law Prevented Collection of Federal Estate Taxes

Under Florida Statute § 95.231, certain defective deeds are cured after the passage of five years. In Saccullo v. U.S., No. 17-14546 (11th Cir. Jan. 11, 2019), the Eleventh Circuit was presented with the task of defining the relationship between the Florida statute and the U.S. Supreme Court’s holding in States v. Summerlin, 310 U.S. 414 (1940). In Summerlin, the Supreme Court held that “when the United States becomes entitled to a claim, acting in its governmental capacity and asserts its claim in that right, it cannot be deemed to have abdicated its governmental authority so as to become subject to a state statute putting a time limit upon enforcement.” Summerlin, 310 U.S. at 417. 

The claim in Saccullo arose after a father executed a defective deed, attempting to transfer property to a trust created for his son’s benefit. This defective deed was executed in 1998, setting the five-year-cure period under Florida Statute § 95.231 as coming into effect in 2003. After the father’s death in 2005, the United States imposed a series of liens on the property in an attempt to assess estate taxes.

The question before the Eleventh Circuit was whether the Florida statute was a “state statute putting a time limit upon enforcement” such that it was barred by the Summerlin principle, or, in the alternative, whether the defective deed had in fact been cured in 2003, preventing a levy of estate taxes in 2005 as the property would have been successfully transferred out of the father’s estate prior to his death. The Middle District of Florida, in response to the underlying quiet-title action, held that the Florida statute did not create good title because the deficiency was not among the technical defects within the statute’s scope, and that the statute was essentially a statute of limitations whose applicability to the U.S. government was barred by Summerlin

On appeal, the Eleventh Circuit reversed the district court, holding that the Florida statute was “not a traditional statute of limitation but . . . a curative act with a limitation provision.” It first acknowledged that on appeal both parties conceded that the deficiency in the 1998 was within the reach of the statute. After concluding that the Florida statute applied to the deed in question, it determined that the statute’s text operates to cure defective deeds immediately, not requiring any formal adjudication. Based on the Eleventh Circuit’s interpretation of the statute, it concluded that the deed was automatically cured in 2003, two years before the father’s death and the accrual of any estate taxes or subsequent claims by the federal government. Because the property was no longer part of the father’s estate at the time of his death, the U.S. government never had a claim to any estate taxes on the property, rendering the Summerlin principle irrelevant as a valid claim did not arise.

The Eleventh Circuit’s holding in Saccullo is instructive for both estate planning attorneys and real estate attorneys practicing in Florida as it clarifies the application of Florida Statute § 95.231. Saccullo interprets the curative action as an immediate result at the culmination of the five-year period, notwithstanding the absence of any formal legal or administrative adjudication.