99-2 USTC ¶50,660] H.W. Reeder, D.O. P.C. (aka Harold Reeder, PC), a corporation, and Harold Reeder, D.O., Plaintiffs-Appellants v. United States of America, Defendant-Appellee

(CA-9), U.S. Court of Appeals, 9th Circuit, 98-16045, 6/17/99, Reversing and affirming an unreported District Court decision

[Code Sec. 6331 ]

Levies and liens: Damages: Effective levy: Valuation of assets: Ownership: Conduct of IRS agent: Recklessness.--A corporation was not entitled to damages for an IRS agent's allegedly reckless levy since the agent sufficiently estimated the combined value of corporate assets and concluded that they were worth more than the cost to perform the seizure and sale. Further, the agent's failure to ascertain that most of the levied assets were not owned by the corporation prior to issuing the levy was not unreasonable since its Form 433-B, Collection Information Statement for Businesses, did not indicate that the assets were leased.
[Code Secs. 6343 and 7432 ]

Levies and liens: Failure to release: Damages: Conduct of IRS agent: Recklessness not shown.--The trial court did not err in its determination that an IRS agent's failure to release levies on a corporation's assets after the corporation paid its deficiencies did not amount to reckless and intentional conduct. Although Code Sec. 6343 requires release of a levy upon full payment, no regulations existed under the statute at that time. The agent may have been negligent in believing that the levies were moot upon full payment and, thus, did not need to be released, but she was not necessarily reckless or intentional. Finally, the corporation could not bring a damage action against the agent under Code Sec. 7432 since that statute applies only to federal tax liens, not levies. [Code Sec. 7433 ]

Standing to sue: Who is the taxpayer: Damage claim: Failure to release lien: Unauthorized collection actions: Damages: Involuntarily dissolved corporation: State law.--An individual lacked standing to proceed with damage claims against the government in connection with the assessment of payroll taxes against his involuntarily dissolved corporation since the corporation, not the individual, was the taxpayer. The government waived its immunity to such suits only when they were brought by the direct taxpayer. However, although the corporation's charter had been terminated by the time it filed suit, under state ( Arizona ) law, it had standing to dispute the assessment as part of its winding up process. BACK REFERENCES: ¶41,778.40

Before: CHOY, MICHEL ¹ and THOMAS, Circuit Judges.

 Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.

MEMORANDUM ²

H.W. Reeder, D.O. P.C. (aka Harold Reeder, P.C.) (the "taxpayer") and Harold Reeder, D.O. ("Reeder") appeal from the district court's dismissal of their claims for damages from seizures and levies for lack of standing and for failure to prove a violation of either Internal Revenue Code ("IRC") (26 U.S.C.) §7432 or §7433. ³ See H.W. Reeder, D.O. P.C. v. United States , No. 93-01327- PHX - PGR (D. Ariz. Mar. 23, 1998 ). We have jurisdiction pursuant to 28 U.S.C. §1291 (1994). We reverse the district court's dismissal for lack of standing as to the taxpayer, affirm the dismissal for lack of standing as to Reeder individually, and as to the taxpayer affirm that its §§7432 and 7433 claims were not proven. Because the parties are familiar with the facts of the case, we will not recount them here.

I

STANDING

Although we review de novo whether the taxpayer or Reeder as an individual had standing to bring this action, see Hughes v. United States [92-1 USTC ¶50,086], 953 F.2d 531, 535 (9th Cir. 1992), the district court correctly held that Reeder does not have standing as an individual because he is not the "taxpayer" for purposes of §§7433 and 7432. Waivers of sovereign immunity, such as those contained in section 7433 and 7432, must be strictly construed. See Lehman v. Nakshian, 453 U.S. 156, 160-61 (1981). Therefore the waiver must be express. The definition of "taxpayer," however, does not by its terms expressly include individuals like Reeder when the tax is assessed against their corporation. See IRC §7701(a)(14) (defining taxpayer as "any person subject to any internal revenue tax"). Here, the payroll taxes in question were owed only by the taxpayer (i.e., the corporation), not the individual, and the government has thus far directed its communications solely towards the corporation and sought to enforce the tax liability in question only against the corporation.

Under Ninth Circuit law interpreting the term "taxpayer," moreover, only direct taxpayers can bring the claims at issue here. See Allied/Royal Parking L.P. v. United States, 166 F.3d 1000, 1003 (9th Cir. 1999) (affirming dismissal of claims brought by individuals under §7433); Ferrel v. Brown [93-2 USTC ¶50,613], 847 F. Supp. 1524, 1528 (W.D. Wash. 1993) ("[T]he waiver of sovereign immunity under §7433 is limited to claims by the direct taxpayer." (emphasis added)), aff'd [94-2 USTC ¶50,611], 40 F.3d 1049, 1049-50 (9th Cir. 1994) (adopting district court opinion). Here, the direct taxpayer unquestionably is the corporation H.W. Reeder D.O. P.C., not Reeder. That Reeder may someday acquire the liability does not make him the "taxpayer" for the years in question. Thus, Reeder lacks standing and the district court's dismissal of his claims on this basis is affirmed.

Under Ninth Circuit law, the capacity of the taxpayer, once a professional corporation incorporated in Arizona, to file a complaint against the government in federal court, is governed by Arizona law. See Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448, 1451 (9th Cir. 1987). The taxpayer's charter was revoked for the last of several times on April 10, 1990 , yet the taxpayer filed the present action in July, 1993. Although corporate existence terminates upon the issuance of a certificate of revocation, see Ariz. Rev. Stat. Ann. §10-095(E), a corporation that is involuntarily dissolved is allowed to protect its rights in winding up its affairs. See United Bank of Ariz. v. Sun Valley Door & Supply, Inc., 149 Ariz. 64, 716 P.2d 433, 437, 438 (1986). The parties dispute whether the taxpayer was "winding up" when it filed suit in July, 1993. ⁴

Arizona law supports the conclusion that the taxpayer was "winding up" its affairs when it brought this claim against the United States and therefore had standing. First, Arizona law does not require that a corporation wind up its affairs within any set time period. Thus, the three-year delay between revocation of the charter and the filing of the complaint does not preclude a finding that the corporation was winding up its affairs. Second, Ariz. Rev. Stat. Ann. §10-105 specifically provides for the survival of remedies after the dissolution of a corporation, including the filing of an action by the shareholders (here, Reeder himself) in the corporate name. Finally, Arizona courts have interpreted §10-105 to include the right, inter alia, to file a lawsuit on behalf of the dissolved corporation. See United Bank, 149 Ariz. at 67, 716 P.2d at 436 ("Nothing in A.R.S. §10-105 specifically limits the available remedy solely to a lawsuit. . . ."). The payment of taxes and associated disputes is clearly part of a corporation's "winding up" process after dissolution. See Continental Oil Co. v. United States [36-1 USTC ¶9266], 14 F. Supp. 533, 537 (Ct. Cl. 1936) (finding under Arizona law that the dissolved corporation continued to exist after dissolution and that the "adjustment of taxes due from the [dissolved corporation] was among the things necessary to the closing up of its business."). Under United Bank, the taxpayer had the right to bring an action against the government as part of that winding up process. Therefore, the district court's dismissal of the taxpayer's claims for lack of standing is reversed. ⁵

II

SECTION 7433 CLAIMS

Section 7433(a) provides a remedy for taxpayers who have been harmed when an officer or employee of the IRS , "recklessly or intentionally disregards any provision of this title, or any regulation promulgated under this title." The taxpayer asserts that this statute was violated by the conduct of Vicki Harding, an IRS revenue officer, when she seized its assets and failed to release levies on certain of its accounts receivable.

A. Seizure of Office Assets in Alleged Violation of IRC §6331(f)

The taxpayer contends that officer Harding recklessly or intentionally violated §6331(f), which prohibits an IRS revenue officer from levying and seizing assets "if the amount of the expenses which the Secretary estimates (at the time of levy) would be incurred by the Secretary with respect to the levy and sale of such property exceeds the fair market value of such property at the time of levy." Harding's reckless and intentional disregard of §6331(f) allegedly occurred when she proceeded with the levy and seizure of the taxpayer's assets without first estimating the likely proceeds of the sale of all the property seized and when she failed to determine that most of the assets were not owned by the taxpayer, but instead were merely on loan or under lease.

While §6331 does require that an estimate be made of the value of the assets at the time of the seizure, it does not require that an exact assessment of value be made or that an independent investigation of value be performed. Section 6331(f) also does not require that an estimate be made prior to the seizure or that all ownership questions be resolved prior to or at the time of the seizure. See United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 721 (1985) (Section 6331 is a "provisional remedy, which does not determine the rights of third parties until after the levy is made, in postseizure administrative or judicial hearings."). The district court did not clearly err in finding that Harding made a sufficient estimate of the combined value of the assets at the time of seizure and concluded that the assets were worth more than the estimated $900 she estimated it would cost to perform the seizure and sale of the assets. To aid her in her valuation of the assets, Harding relied on Form 433-B, in which Reeder himself disclosed a value of the assets of over $16,000. ⁶ This form did not indicate that any of the assets were merely leased. During the seizure, Harding did become aware that one asset, the copier, was leased, but its value was only $950 of the more than $16,000 in total assets. All the other assets appeared to belong to the taxpayer. Harding in fact did not learn that other assets were not owned by the taxpayer until sixteen days after the seizure when she received a letter from taxpayer's counsel to this effect. Thus, at the time of the seizure Harding reasonably believed that the combined value of the assets still exceeded the estimated cost of conducting the seizure and sale of the assets. At the very least, no evidence established or even tended to establish that any violation of §6331(f) by Harding, assuming one existed, was reckless or intentional, or that the district court clearly erred in finding a lack of recklessness or intentionality.

B. Failure to Release Certain Levies in Alleged Violation of IRC §6343(a)(1)

Section 6343(a) provides that levies shall be released if "the liability for which such levy was made is satisfied or becomes unenforceable by reason of lapse of time. . . ." The taxpayer correctly points out that Harding's procedure for releasing levies appears to have been flawed in some respects. For example, §6343 requires that levies be released when "satisfied," yet Harding did not release those levies paid in full. In addition, an accounts receivable list bearing running annotation is an important record generated by the IRS and it was lost, making it more difficult to determine which patients paid and which did not.

These failings, however, do not necessarily amount to a reckless or intentional disregard of the statute. For example, §6343 was amended in 1989 to require release of satisfied levies, which Harding failed to do, but no regulations were put in place to guide an IRS officer in Harding's situation until 1994. See 26 C.F.R. §301.6343-1(f) (effective as amended Dec. 30, 1994 ). Harding may have concluded, as the district court certainly did, that it was not necessary to release the levies on which she received full payment since such levies "would have been moot once the full payment was made." H.W. Reeder D.O. P.C., slip op. at 14. Although this explanation may not excuse a violation of §6343, it does support the district court's conclusion that Harding was not acting recklessly or with intent to violate the statute by failing to release these levies. Furthermore, the basic procedures were arguably adequate even though some paperwork was lost, because each notice of levy included a copy that was to be sent to the taxpayer when the levy was paid so that the taxpayer would receive the same information as the IRS and be able to monitor the payments as they were made. See id. at 13.

Although certain of Harding's actions may have been flawed, and may even constitute negligence, the district court did not clearly err in concluding that these actions did not amount to recklessness or an intentional disregard of the requirements of §6343. Its decision not to impose liability under section 7433 is therefore affirmed.

III

SECTION 7432 CLAIM

Section 7432(a) allows a taxpayer to bring an action for damages against the IRS if "any officer or employee of the [ IRS ] knowingly, or by reason of negligence, fails to release a lien under section 6325 on property of the taxpayer." Section 7432 applies only to a federal tax "lien." The taxpayer argues that Harding's failure to release levies is tantamount to a failure to release liens. However, a levy is not a lien. See Ferrel [93-2 USTC ¶50,613], 847 F. Supp. at 1528 (dismissing §7432 claim because levy imposed was not a lien imposed by the IRS under §6325, as required by §7432), aff'd [94-2 USTC ¶50,611], 40 F.3d 1049 (adopting district court opinion as its own). Even case law relied on by the taxpayer notes the difference between the two. See American Acceptance Corp. v. Glendora Better Builders, Inc. [77-1 USTC ¶9348], 550 F.2d 1220, 1223 (9th Cir. 1977) ("The levy operated as a seizure; a lien is a security interest."). The district court correctly concluded that §7432 did not apply to the acts involving the levies at issue here, and this aspect of its decision is affirmed.

IV

Because we affirm the district court's dismissal of the taxpayer's claims on the merits of liability under sections 7433 and 7432, we need not and do not reach the issue of whether the taxpayer proved any damages. The tax payer Reeder shall bear his own costs.

REVERSED-IN-PART AND AFFIRMED-IN-PART.

¹ The Honorable Paul R. Michel, Circuit Judge, United States Court of Appeals for the Federal Circuit, sitting by designation.

² This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as may be provided by Ninth Circuit Rule 36-3.

³ Unless otherwise noted, the statutes and regulations cited throughout this opinion refer to those in effect during the relevant time period in 1991.

⁴ The district court concluded that the taxpayer did not have standing because it was not "winding up." The district court found that Reeder's testimony at trial "completely contradicted the taxpayer's previous representation made to the Court [when he] testified that the taxpayer was not winding up its business subsequent to the time that its corporate charter was revoked." H.W. Reeder D.O. P.C., slip op. at 23. However, it appears that Reeder did not admit that he was not winding up the corporation, because in his testimony he denied saying that the corporation was not winding up and asserted that "[t]echnical matters were winding up." Excerpt of Record 107 at 763. What he apparently meant by the statement cited by the district court is simply that the medical practice was continuing.

⁵ This result avoids a situation where the conduct of the IRS when collecting the taxes could forever go unchallenged because neither the dissolved corporation nor its shareholder has standing to assert claims under sections 7433 and 7432. The government argues that Reeder would have standing to sue if the IRS chose to collect from him as a transferee of the corporate assets under IRC §6901(a). But the IRS has already collected the taxes owed and has no reason to pursue Reeder as a transferee. Thus, under its reading of the law, the IRS could forever avoid a challenge to its practices under sections 7432 and 7433 simply by not asserting transferee liability against a dissolved corporation's shareholders.

⁶ The district court did not clearly err in finding that the evidence established that Harding had Form 433-B in her possession at the time of the seizure and that it indicated that the taxpayer's assets were worth over $16,000. This finding is supported by the district court's credibility determinations at trial and Reeder's amended 1989 tax return, which indicated an identical value of the assets. See H.W. Reeder D.O. P.C., slip op. at 6.

[78-2 USTC ¶9742]Eric Nickerson v. William R. Gilbert, Paul Proulx, James Healey

U. S. District Court, Dist. R. I., Civil Action No. 74-173, 6/6/78

[Code Sec. 6331--result unchanged under '76 Tax Reform Act]

Levy and distraint: Seizure of real estate jointly owned: Seizure of personal property: Immunity of government agents.--In a jury trial, the taxpayer failed to prove that the IRS agents' seizure of personal property located in the building jointly owned by the taxpayer and his son damaged the taxpayer or violated his constitutional rights. Further, the jury did not find that the taxpayer was libeled by the posting of the seizure notice.

George Healy, Jr., 40 Fountain St., Providence, R. I. 02903, for plaintiff. Richard F. Mitchell, Department of Justice, Washington, D. C. 20530, for defendants.

Charge to the Jury

DAY , Senior Judge:

Mr. Foreman and Members of the Jury: We have now reached the final stage of this trial. The issues herein are about to be submitted to you for your determination. It now becomes my duty to instruct you as to the principles of law you must follow in deciding these issues. Although you as the jury as the sole judges of the facts in this case, you are duty bound to follow the law as I shall give it to you in these instructions, and to apply that law to the facts as you find them to be from the evidence that has been presented here during the trial of this case. You are not to single out any particular instruction alone as stating the law governing this case, but must consider these instructions as an entirety.

As you understand, this is a civil action in which Eric Nickerson, a citizen of Rhode Island, is the plaintiff and William R. Gilbert and Paul Proulx, Internal Revenue Officers, and their immediate superior, James Healey, are the defendants. In legal parlance the party who institutes a law suit is the plaintiff. The parties who are sued are the defendants.

This case arises out of certain events which took place on June 5, 1974 , when the defendants Gilbert and Proulx, acting under the supervision of their supervisor, Mr. Healey, entered and seized equipment and tools from a garage and service station in Little Compton which was operated by plaintiff's son, Warren Nickerson, but which was owned jointly by both plaintiff and his son. Said agents padlocked said premises in an attempt to collect federal income taxes due from and unpaid by said son and his wife and posted a notice of tax levy thereupon showing the outstanding tax liability of plaintiff's son and his wife.

The plaintiff alleges in his Complaint that the defendants entered said garage and service station and wrongfully forced him to vacate said property in violation of his right to be free from unreasonable searches and seizures; that the defendants unlawfully and without his consent entered said garage and service station jointly owned by him and his son and wrongfully seized his personal property, and excluded him from said premises in violation of his constitutional rights; that the defendants padlocked said premises and excluded him therefrom and defamed him by conspicuously displaying seizure notices on the premises; further, that the defendants deprived him of said personal property and of his right to carry on his business and occupation and wrongfully deprived him of the use of said property. The plaintiff further alleges that these acts were wrongful, malicious, tortious, and intentional, and were committed with a wanton disregard for the plaintiff's rights.

In addition to compensatory damages for said alleged injuries and losses, plaintiff Eric Nickerson seeks punitive damages against each of said defendants.

In their Answer, the defendants admit that they were employees of the Internal Revenue Service on the date in question who were performing the duties of their employment as such, and denied that they are in any way liable to the plaintiff as alleged by him in his Complaint.

The Complaint and Answer which I have just summarized briefly are what we call the pleadings in this case. They are merely the statements of the parties; they are not evidence and are not to be considered by you as being any proof whatever of the contentions made therein.

I shall now explain some provisions of law which should be helpful to you:

I instruct you that the Fourth Amendment to the Constitution of the United States upholds "the right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures . . ."

I instruct you that the Internal Revenue Service and its employees are charged by law with the collection of all taxes imposed under the Internal Revenue Code. When an assessment is made for unpaid federal income taxes, and notice and demand for taxes are given to the delinquent taxpayer, it is then the obligation of the Internal Revenue Service and of the appropriate Government officials to make every reasonable effort, in accordance with the law, to collect said assessed taxes.

An assessment for unpaid federal taxes creates by law a lien upon all property of the individuals against whom the assessment is made, and in this case against Warren Nickerson and his wife. By a lien, I mean a legal charge or imposition, much like a mortgage or other security interest, upon the delinquent taxpayer's property, both real and personal. That lien imposed by law will attach to all of the delinquent taxpayer's property that he owns at the time of the assessment, or which he subsequently acquires. The lien is enforceable by the United States for as long as the tax remains unpaid. The Internal Revenue Service is authorized by law to file a public notice of the lien for unpaid federal taxes in an appropriate recording office in the county in which the taxpayer resides, which in this case was in the Town Clerk's office in Little Compton, Rhode Island.

In addition to the filing of a public notice of such federal tax lien, the Internal Revenue Service, its employees, has further statutory authority to collect unpaid federal tax assessments. If an assessment is made for unpaid federal taxes, and if the delinquent taxpayer does not pay his tax bill when he receives it, then the Internal Revenue Service is authorized under the law to proceed to seize and, if necessary, to sell the delinquent taxpayer's property in order to satisfy said outstanding tax liabilities. Virtually all property of a delinquent taxpayer is subject to seizure including jointly-owned property.

The first claim of the plaintiff concerns his interest in real property. The plaintiff and his son Warren Nickerson, at the time involved in this case, owned the building housing Nickerson's Garage and the underlying land as joint tenants. The plaintiff claims that the defendant Internal Revenue officials seized said building, ousted him from the building, and denied him access to it. The defendants on the other hand denied that they seized the building, and claim instead that they seized only the contents of the building belonging to Warren Nickerson and to his wife who were then delinquent in their income tax payments. If you find that the defendants did not seize the building, but merely locked it to secure its contents, then you must find in favor of the defendants with respect to the plaintiff's real property claims.

Because the plaintiff and his son Warren Nickerson owned the land and said building on it as joint tenants, each had a possessory interest in the property and the right to enter upon the premises. However, under the law the Internal Revenue Service had the legal power and authority to seize Warren Nickerson's interest in said property for the payment of his tax liabilities, and accordingly had the authority to take actual possession of said property until Warren Nickerson's interest could be sold at public auction to satisfy his unpaid taxes. After such a sale, if there was such a sale, the plaintiff and the purchaser would own the property between them, and each would have equal access to the property. Therefore, if you find that the defendants seized the property or seized Warren Nickerson's interest in said property, in order to collect the federal taxes owned by Warren Nickerson, then you must find in favor of the defendants with respect to the plaintiff's real property claims.

On the other hand, if you find that the defendants seized the property, not in order to collect federal taxes, but rather for some private or personal purpose of their own, then you must proceed to the immunity defenses, and if you find the immunity defenses inapplicable, then you must proceed to the question of damages, on which issue I will hereinafter instruct you.

The second claim of the plaintiff Eric Nickerson concerns personal property of his which was located within the garage. He claims that tools and equipment of his were wrongfully interfered with through the Internal Revenue seizure. It is for you to determine whether the plaintiff had any tools and equipment locked up in the garage, whether the interference with those tools and equipment was substantial, and whether the defendants intended to exercise dominion and control over this personal property. If you find that the plaintiff, as he claims, did have certain personal property in the building that houses the garage, that there was a substantial interference with his property, and that the defendants intended to exercise dominion and control over this personal property, then you must proceed to consider the immunity defenses that are accorded to the members of the Internal Revenue Service. If you find that the immunity defenses are inapplicable, then you should proceed to the question of damages, on which matters I will hereinafter instruct you. On the other hand, if you find that the plaintiff did not have any personal property on the premises, or that there was no substantial interference with his personal property, or that the defendants did not intend to exercise dominion and control over this personal property, then you must find for the defendants with regard to the plaintiff's personal property claims.

Another claim asserted by the plaintiff is for actual and punitive damages on account of an alleged libel, in the form of the posted seizure notices placed around and about the garage. The defendants were required under Internal Revenue Service procedures to post seizure notices when a seizure was made.

Now, a libel is a false and malicious defamation of a person in writing, tending to expose him to public hatred, contempt or ridicule, or to deprive him of the normal benefits of public confidence and social relationships.

The plaintiff's claim, as asserted in his Complaint, has three essential elements, and these are as follows:

First, that the defendants published the seizure notices, by posting them around Nickerson's Garage, and that these notices were a libel, as I have defined that term.

Second, plaintiff claims that these notices were of and about the plaintiff. By this I mean that, although the seizure notices did not name the plaintiff, they were intended to refer to him, and that it is reasonably probable that members of the public who read the notices would understand them as referring to him.

Third, that this libel was read in fact by members of the general public.

The plaintiff has the burden under the law of establishing these essential elements of his libel claim by a preponderance of the evidence as I have defined that term. If you find that he has done so, then you must proceed to the immunity defenses asserted by the defendants, and if you find the immunity defenses inapplicable, then you must proceed to the question of damages.

I instruct you that truth is a defense to any libel action such as this. If you find that the publications at issue were substantially true, then you must find in favor of the defendants.

In addition, I instruct you that the defendants, that is, the Internal Revenue agents, were permitted in the scope of their responsibilities as federal officials to post seizure notices in the manner in which the notices in this case were posted. Even if these notices were defamatory of the plaintiff, you may find for the plaintiff only if you find that the posting of these seizure notices were caused or motivated by spite or ill will directed toward the plaintiff by the defendants. Thus, if you find from the evidence and reasonable inferences to be drawn from it, that the actions of the defendants in posting these seizure notices were not motivated by spite or ill will, then you must find in favor of the defendants with respect to the libel claim.

Should you determine from the evidence and the reasonable inferences to be drawn from it that the defendants have, in fact, violated a legally protected right of the plaintiff, you must then decide whether the defendants acted in good faith in such a manner to be immune from liability for damages.

The Government officers, such as the defendants before the Court, who act within the scope of their duties are immune from civil suits for damages, even where their actions have violated a protected right of the plaintiff, if (1) the action was taken in good faith, and (2) such action was taken with a reasonable belief in the propriety of their conduct.

Should you determine that the plaintiff has established by a fair preponderance of the evidence that the defendants did violate a legally protected right or rights of the plaintiff, and that they are not entitled to the defenses from liability that I have described to you, then, in that event, and only in that event, must you determine the actual injury, if any, the defendants' actions caused the plaintiff and for which he is entitled to such compensation, as you believe fair, just and warranted.

* * *

You will return separate verdicts as to each of the defendants, William R. Gilbert, Paul Proulx and James Healey. Each of those verdicts must be unanimous. If you find that the plaintiff has not satisfied you by a fair preponderance of the credible evidence and the reasonable inferences to be drawn from it, that the particular defendant whose case you are considering did commit the acts alleged by the plaintiff, as claimed by plaintiff, or if you find such defendant to be immune from liability as I have described that term, then your consideration of the claim against him will end and your verdict will be in favor of the defendant.

On the other hand, if you find that the plaintiff has established by a fair preponderance of the evidence and the reasonable inferences to be drawn from it that the defendant whose case you are considering did commit the acts alleged by the plaintiff on June 5, 1974 , as claimed by him, and if you find such defendant not to be immune from liability as I have described that term, then, your verdict as to such defendant shall be in favor of the plaintiff.

* * *

Judgment

This action came on for trial before the Court, Honorable Edward W. Day, United States Senior District Judge, presiding, and the issues having been duly tried and a decision having been duly rendered,

It is Ordered and Adjudged that judgment shall enter for the defendants.

[86-1 USTC ¶9173] Guy S. Burroughs II and John W. Platt, Sr., Plaintiffs-Appellants v. Arthur E. Wallingford, Dora Nichols, R.D. Powell, Patrick Hayes, A.A. Muse, Jr., D.W. Cranford, Ruth Krebs, and Annette Rivera, Defendants-Appellees

(CA-5), U.S. Court of Appeals, 5th Circuit, No. 85-2017, Summary Calendar, 1/13/86 , 780 F2d 502, Affirming and remanding unreported District Court decision

[Code Secs. 6331 and 7421 ]

Levy and distraint: Constitutional rights: Damages: Frivolous appeals: Double costs and attorneys fees.--The taxpayers' suit for damages against fellow employees for complying with two tax levies that ordered withholding and payment to the IRS of a portion of the taxpayers' wages was properly dismissed. A temporary restraining order sought by the taxpayers to enjoin the employees from future compliance with the tax liens was properly denied. The income tax laws are constitutional and the tax levy procedure in Code Sec. 6331 does not violate due process. The appellees (the employees against whom the taxpayers' suit for damages was directed) were immune from liability to the taxpayers for their compliance with the levies. The district court did not err in striking the taxpayers' notice of appeal from the order denying their application for a temporary restraining order. The appellees were awarded double costs and attorneys fees and the case was remanded to the district court so that court could make a determination as to the amount of attorneys fees incurred.

Guy S. Burroughs II, 12710 Green River Dr., Houston, Tex. 77044, pro se. Horace E. Campbell, Jr., 3500 Entex Bldg., Houston, Tex. 77002, for defendants-appellees. Carleton D. Powell, John A. Dudeck, Jr., Department of Justice, Washington, D.C. 20530, for Amicus U.S.

Before THOMAS GIBBS GEE, CAROLYN DINEEN RANDALL and W. EUGENE DAVIS, Circuit Judges.

Opinion

Per Curiam

EC: Appellees, employees of Arco Petroleum Products Company, received and complied with two tax levies that ordered that a portion of appellants' wages be withheld and paid to the IRS to satisfy appellants' indebtedness. Appellants then filed this suit for damages against appellees for complying with the tax liens without a court order. Appellants also sought a temporary restraining order enjoining appellees from future compliance with the liens. Appellees filed motions to dismiss the claim against them and sought double costs and attorney's fees. An order was entered on December 12, 1984, denying the temporary restraining order. Appellants filed a notice of appeal to this order on December 28, 1984. On January 8, 1985, a final judgment and order was entered granting appellees' motion to dismiss for failure to state a claim upon which relief could be granted and striking appellants' notice of appeal. Appellants then filed this appeal. We affirm and award double costs and attorney's fees for prosecuting a frivolous appeal.

Appellants' suit raises the ghosts of arguments past challenging the income tax laws. Appellants argue that (1) a lien cannot be placed on their "right to earn and hold property" because the Declaration of Independence states that this right is "un-a-lien-able;" (2) only artificially created persons, such as corporations, can be taxed; and (3) they were denied due process by the levies.

The constitutionality of income tax laws has been consistently upheld, Stites v. United States [84-2 USTC ¶9954 ], 746 F.2d 1085 (5th Cir. 1984) (and cases cited), and appellants' arguments otherwise are totally without merit. Additionally, the tax levy procedure in IRC §6331 does not violate due process. Meyers v. United States, 647 F.2d 591 (5th Cir. 1981). At any rate, these matters are properly considered in a suit against the IRS and not against appellees. Appellees in this case are guilty of nothing more than complying with two IRS levies issued by authority of sections 6331 and 6332(a) of the Internal Revenue Code. They are immune from liability to appellants for complying with the levies. ¹ I.R.C. §6332(d) (West 1967). Appellants also contend that the district court erred in striking their notice of appeal from the order denying their application for a temporary restraining order. The denial of this application was not appealable, Nelson v. Rosenthal [76-2 USTC ¶9690 ], 539 F.2d 1034, 1035 (5th Cir. 1976), and even if the district court erred in striking the notice of appeal, it was harmless error.

Appellees seek double costs and attorney's fees from appellants on the grounds that the appeal is frivolous. In Lonsdale v. Commissioner of Internal Revenue [81-2 USTC ¶9772 ], 661 F.2d 71 (5th Cir. 1981), we warned that appeals premised on meritless and "long-defunct" arguments such as those advanced in this case invited sanction. Accordingly, we award appellees double costs and attorney's fees. Because the record does not reflect the amount of attorney's fees incurred, we remand to the district court to make this determination. Knoblauch v. Commissioner of Internal Revenue [85-1 USTC ¶9104 ], 749 F.2d 200 (5th Cir. 1984), cert. denied, 106 S.Ct. 95 (1985).

AFFIRMED and REMANDED.

[86-1 USTC ¶9392] Patricia Pawlowske, Plaintiff v. Chrysler Corp., et al., Defendants

U.S. District Court, No. Dist. Ill., 85 C 4209, 2/13/85 , 623 FSupp 569

[Code Secs. 6331 and 6332 ]

Levy and distraint: Effect of levy: Damages.--An individual had no right to recover damages from her employer as a result of the employer's compliance with an IRS levy on the taxpayer's wages. The fact that the notice of levy was