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Joseph
T. Hayes and Marilyn Hayes v. Commissioner.
The
Joseph T. Hayes and Marilyn Hayes, pro sese; Theresa G. McQueeney, for respondent.
MEMORANDUM
FINDINGS OF THORNTON, Judge: Pursuant to section 6330(d), petitioners seek review of an Appeals Office determination sustaining a proposed levy.1
FINDINGS
OF The
parties have stipulated most of the relevant facts, which we
incorporate herein by this reference. When petitioners filed their
petition, they resided in
On their
joint Form 1040, U.S. Individual Income Tax Return, for 1994 (Form
1040), petitioners reported a $9,223 amount due but made no
remittance with their return. Respondent assessed the amount
reported on the return. On After an examination, respondent issued a notice of deficiency, determining a $3,010 deficiency in petitioners' 1994 Federal income tax liability. Petitioners did not petition the Tax Court to redetermine the deficiency. On June 2, 1997, respondent assessed the $3,010 additional tax.
On their joint Form 1040 for 1996, petitioners reported a $1,588 amount due but made no remittance with their return. Respondent assessed the amount reported on the return. After an examination, respondent issued a notice of deficiency, determining a $4,921 deficiency in petitioners' Federal income tax for 1996. Petitioners did not petition the Tax Court to redetermine the deficiency. On February 15, 1999, respondent assessed the $4,921 additional tax.
On their joint Form 1040 for 1997, petitioners reported total tax of $1,046, withholding credits of $464, an estimated tax penalty of $29, and an amount due of $611. Petitioners remitted the $611 with their 1997 return; however, respondent applied this payment against petitioners' outstanding 1994 balance and assessed the amount reported on their 1997 return, plus penalties and interest.
On March 6, 2000, respondent issued to petitioners a Letter 1058, Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing for the tax years 1994, 1996, and 1997. Petitioners requested and received the referenced hearing. On April 11, 2002, respondent issued to petitioners a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330, sustaining respondent's proposed levy.
OPINION If a
taxpayer fails to pay any Federal income tax liability within 10
days of notice and demand, the Secretary is authorized to collect
the tax by levy on the taxpayer's property. Sec.
6331(a). Upon request, the taxpayer is entitled to an
administrative hearing before the Appeals Office of the Internal
Revenue Service. Sec.
6330(b)(1). If dissatisfied with the Appeals Office
determination, the taxpayer may seek judicial review in the Tax
Court or a Respondent's position before trial, as reflected in his pretrial memorandum, was that petitioners had never paid the $611 amount due as shown on their joint 1997 return. At the commencement of trial, respondent's counsel stated that as she was reviewing respondent's transcripts of petitioners' accounts in preparation for trial, she had discovered that "it appears as though the taxpayer sent in his 1997 return with a payment of $611. We're not sure as to why, but that payment got applied to 1994 rather 1997."3 On the basis of all the evidence, we have found, as respondent's counsel has suggested, that petitioners remitted the $611 payment with their 1997 return. Respondent has offered no explanation or justification for applying the $611 remittance to petitioners' 1994 account; respondent has cited, and we are aware of, no authority for this action. Cf. Hill v. United States [59-1 USTC ¶11,858], 263 F.2d 885, 887 (3d Cir. 1959) ("We do not have any doubt that in the ordinary case where a taxpayer fills out his form, makes out his check and sends them in that he intends the remittance to be in discharge of his liability and that the Collector receives it in the same way."); Baimbridge v. United States [2004-2 USTC ¶50,344], 335 F. Supp. 2d 1084, 1095 (S.D. Cal. 2004) ("Delivery of a check with a tax return is generally sufficient to designate the payment toward the liability for the period of the return."). Petitioners' $611 payment fully satisfied their 1997 tax liability.4 Accordingly, respondent's proposed levy is not sustained insofar as it relates to petitioners' 1997 tax year. Petitioners have not challenged their underlying tax liabilities for 1994 and 1996. At trial, petitioner husband made a generalized request for relief from penalties and interest. Petitioners have not alleged, however, and the record does not reveal any basis for granting petitioners any relief in this regard with respect to their 1994 and 1996 tax years. Petitioners have not otherwise alleged, and the record does not suggest, any reason why respondent's proposed levy with respect to their 1994 and 1996 tax years should not proceed.5 In light of the foregoing, Decision will be entered for respondent with respect to petitioners' 1994 and 1996 tax years and for petitioners with respect to petitioners' 1997 tax year.
2002-2 USTC ¶50,639] In re Johnnie L. Brown, Debtor
Larry
Moses, Assignee of Debtor, pro se. Susan M. Knepel, Mark D.
Petersen, for I.R.S. MEMORANDUM
DECISION ON PETITION FOR PAYMENT OF UNCLAIMED FUNDS MCGARITY, Bankruptcy Judge: This proceeding involves a dispute over unclaimed funds held by the Clerk of Bankruptcy Court after the debtor's chapter 13 case was dismissed without confirmation of a plan, and the trustee was unable to return the funds to the debtor. This court has jurisdiction under 28 U.S.C. §1334. Because the issues in this matter involve the administration of a case filed under Title 11 of the United States Code, and also a claim against the debtor, it is a core proceeding under 28 U.S.C. §157(b)(2)(A) and (B). The debtor filed a chapter 13 petition on November 20, 1998, and after failing to file a feasible plan, his case was dismissed on June 23, 1999. After the case was dismissed, the trustee attempted to return the undistributed payments made to him by the debtor. The check to the debtor in the amount of $ 916.42 was returned to the trustee by the postal service as unclaimed. The trustee then paid the unclaimed funds to the Clerk of Bankruptcy Court. 11 U.S.C. §347(a); Fed. R. Bankr. P. 3011. On
December 4, 2001, The Financial Resources Group filed a petition
for payment of unclaimed monies on behalf of the debtor. Notice of
such request was given to the United States Attorney. 28 U.S.C. §2042.
At the hearing on the Internal Revenue Service's request for
additional time to review the request for unclaimed funds, the According
to the Resolution of this matter depends upon the interplay between two federal statutes, 11 U.S.C. §1326(a)(2) and 26 U.S.C. §6321. Section 1326(a)(2) of the Bankruptcy Code provides that A payment made under this subsection shall be retained by the trustee until confirmation or denial of confirmation of a plan.. . . If a plan is not confirmed, the trustee shall return any such payment to the debtor, after deducting any unpaid claim allowed under section 503(b) of this title. 11
U.S.C. §1326(a)(2). Section 6321 of the Tax Code provides: If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any cost that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. 26
U.S.C. §6321. Thus,
the court must determine whether the funds can only be turned over
to the debtor pursuant to 11 U.S.C. §1326(a)(2), or whether the
monies may be turned over to the The The
court noted that §6334(a) 1
of the Internal Revenue Code provided 13 categories of property
exempt from levy under a federal tax lien, and those categories
did not include funds held by the chapter 13 trustee after
dismissal of a bankruptcy case. Beam [99-2
USTC ¶50,917 ], 192 F.3d at 944. Because §6334(c)
further specified that no other property or rights were exempt
from Other
cases have allowed a creditor to assert state law liens against
funds in the possession of the chapter 13 trustee upon dismissal
of the case; however, the majority of those cases require the
creditor to pursue their rights against the property in state
court. See, e.g., In re Oliver, 222 B.R. 272 (Bankr. E.D.
Va. 1998); In re Walter, 199 B.R. 390 (Bankr. C.D. Ill.
1996); In re Clifford, 182 B.R. 229 (Bankr. N.D. This
view is not unanimous, however. One court determined that judicial
economy favored resolving the disposition of the creditor's lien
in bankruptcy court, even though no plan was confirmed. In re
Doherty, 229 B.R. 461 (Bankr. E.D. Washington 1999). The court
concluded that the chapter 13 trustee's costs primed both the
debtors' claim to the funds as well as any state tax lien
interest. Nevertheless, the state department of revenue had a lien
on the funds that were not necessary to pay the administrative
costs, i.e., the debtor's funds, and the trustee was
required to comply with the levy. The Doherty court noted
that leaving the lien creditor with the obligation to complete its
pursuit of the funds in state court was not an attractive
solution. One
treatise, Mertens Law of Federal Income Taxation, takes the
position that the funds should be turned over to the When a taxpayer files for bankruptcy, that action will operate as an automatic stay to prevent collection efforts until there is a court hearing. Although a bankrupt taxpayer may possess property not subject to a levy because of the automatic stay provision, a tax lien will extend to such property. When a bankruptcy petition is filed, the Service will also maintain whatever tax liens that it has against the bankrupt's non-exempt property. If a bankruptcy case is dismissed, the bankrupt [sic] trustee is then obligated to either honor a notice of levy related to the non-exempt property or be subject to a penalty. 14
Mertens Law of Fed. Income Tax'n §54A:10 (citing In re
Beam [99-2
USTC ¶50,917 ], 192 F.3d 941 (9th Cir. 1999)). This
court is satisfied that the This decision stands as the court's findings of fact and conclusions of law as required by Fed. R. Bankr. P. 7052. A separate order consistent with this decision will be entered. ORDER
DIRECTING PAYMENT OF UNCLAIMED FUNDS For the reasons stated in the court's memorandum decision entered on this date, the Clerk of Bankruptcy Court for the Eastern District of Wisconsin is ordered to pay the unclaimed funds due the debtor in the above referenced case to the Internal Revenue Service. 1 The specific exemptions include wearing apparel and school books, fuel, necessary personal expenses, books and tool, unemployment benefits, undelivered mail, certain annuity and pension payments, workers' compensation, judgments in support of minor children, minimum exemptions for wages and salary, certain service-connected disability payments, certain public assistance payments, assistance under the Job Training Partnership Act, residences exempt in small deficiency cases and principal residences and certain business assets exempt in absence of certain approval or jeopardy. 26 U.S.C. §6334(a)(1)-(13). 2002-2 USTC ¶50,563] Dennis Needham, Plaintiff v. United States of America, Defendant U.S.
District Court, [Code
Sec. 6330 ] HICKS, District Judge: On
December 21, 2001, the I. Background Plaintiff Dennis Needham filed a Complaint seeking damages and requesting that the Court set aside an invalid collection determination pursuant to 26 U.S.C. §6330. Plaintiff's
individual income tax returns for 1998 and 1999 contained zeros
down the left hand margin to reflect zero income and zero taxes
due to the government. As a result, the Internal Revenue Service
(" II. Analysis A.
Standard of Review A motion for summary judgment terminates, without a trial, actions in which "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The
movant is entitled to summary judgment if the non-moving party,
who bears the burden of persuasion, fails to designate "
'specific facts showing that there is a genuine issue for trial.'
" Celotex Corp. v. Catrett, 477 Section 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination. However, the legislative history indicates that the court should conduct a de novo review only "where the validity of the tax liability was properly at issue at the administrative hearing." H. Conf. Rept. 105-599, 105th Cong.2d Sess. 266 (1998). Where the amount of the underlying tax liability is not properly part of the appeal, the court reviews a Notice of Determination for abuse of discretion. See Sego v. Comm'r of Internal Revenue [CCH Dec. 53,938 ], 114 T.C. 604, 609-10 (2000). B.
Plaintiff's Section 6330 Appeal Plaintiff raises the same issues before this Court that he raised at the May 24, 2001 hearing. Plaintiff challenges the Constitutionality of the May 24 hearing, the sufficiency of the Notice, the appeals officer's reliance on computer generated records, the authority of the appeals officer and the legitimacy of individual income tax generally. Here the
For
example, in G.M. Leasing Corp. v. United States [77-1
USTC ¶9140 ], 429 U.S. 338 (1977), the United States
Supreme Court held that 26 U.S.C. §6331 authorizes the collection
of federal taxes by levy on the property of any person who refuses
or neglects to pay any tax. Consequently, and contrary to
Plaintiff's assertion, it requires no court order for the Nor is
it improper for an appeals officer to rely on computer records in
determining that the proper administrative procedures were
followed to provide notice and for computing an assessment against
a taxpayer. Plaintiff has not, and cannot, present a material fact that would allow him to defeat Defendant's Motion for Summary Judgment. Defendant's Motion for Summary Judgment (#8) is, therefore, GRANTED. The clerk is directed to close the file. IT IS SO ORDERED. [2002-1
USTC ¶50,425]
[Code Secs. 7433 and 7430
] Karen Wozniak, Department of Justice, Washington, D.C. 20530, for U.S., I.R.S. Joseph E. Wallen, Amdursky, Pelky, Fennell & Wallen, P.C., Oswego, N.Y., for Amdursky, Pelky, Fennell & Wallen, P.C., and Dean P. Koski. MEMORANDUM-DECISION
SCULLIN, JR., Chief District Judge: On On In a
Memorandum-Decision and Order, dated August 24, 2001, the Court
instructed Subsequently,
on October 30, 2001, the Presently
before the Court are Amdursky's and Koski's motion for summary
judgment and the II.
DISCUSSION A. Timeliness of the levy Section
6502(a) of Title 26 provides that a tax liability may be collected
by levy if the levy is made within ten years after the assessment
of the tax. A levy that is made within this period of limitations
remains enforceable to the extent of the value of the levied-upon
property even if the person who receives the levy does not
surrender the subject property within that period. See 26
C.F.R. §301.6343-1(b)(1); see also In the
present case, the Although
acknowledging that the Amdursky
and Koski claim that the The
Court disagrees. In United States v. Donahue Indus., Inc.
[90-2 USTC ¶50,343], 905 F.2d 1325, 1330 (9th Cir. 1990), the
Ninth Circuit rejected the same argument, noting that the
defendant had failed to distinguish between levies on tangible
property and levies on intangible property. The court explained
that because the The
Court agrees with the Ninth Circuit's analysis of §6502's
requirements. Therefore, the Court concludes that, because the B.
Pursuant
to §6331 of Title 26, "if any person liable to pay any tax
neglects or refuses to pay the same within 10 days after notice
and demand, it shall be lawful for the Secretary to collect such
tax . . . by levy upon all property and rights to property . . .
belonging to the person." 26 U.S.C. §6331(a). State law
determines whether a taxpayer has rights. See United States v.
Nat'l Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 722,
86 L.Ed.2d 565, 105 S.Ct. 2919 (1985). "[A] levy extends only
to property possessed and obligations which exist at the time of
the levy." 26 C.F.R. §301.6331-1(a) . "Obligations
exist when the liability of the obligor is fixed and determinable
although the right to receive payment thereof may be deferred
until a later date." Amdursky
and Koski assert that as of Finally,
Amdursky and Koski contend that, even assuming that Amdursky's
and Koski's argument finds support in United States v. Morey
[93-1 USTC ¶50,224], 821 F.Supp. 1438 (W.D. Okla. 1993). In that
case, the taxpayer, Burger, had been issued an assessment on The issue before the court was "whether, at the time the levy was served upon Morey, Morey was obligated with respect to property or rights to property subject to the levy." Morey [93-1 USTC ¶50,224], 821 F.Supp. at 1440. Morey argued that he was not because his liability on the contract was disputed. The court agreed. The
court began its analysis by noting that " 'because the A
contrary result was reached in Simon v. Playboy Elsinore
Assocs. [91-1 USTC ¶50,231], 1991 U.S. Dist. LEXIS 5729, The
Simons contended that the Notice of Levy was invalid when served
because the parties had not reached a finalized settlement
agreement. To the contrary, the The case
upon which Simon relied, although in some respects
distinguishable from the present case, is instructive. In that
case, the issue was which of two liens had priority. The The
issue before the court was whether the If a right of action be property, such property is created at the moment of wrongful impact with consequential injuries. The Federal lien would attach immediately though the extent of satisfaction must await the amount of recovery, less authorized reductions or recognized priorities. The
court went on to state that Walton's income taxes became due at
the time he was required to file his return and the lien arose
when the assessment was filed. "Such lien is a continuing one
and 'covers property or rights to property in the delinquent's
hands at any time prior to expiration' of the lien." The
Court finds the reasoning of Simon more persuasive than
that of Morey, particularly in light of the Simon
court's reliance upon In re Estate of Walton. Thus, the
Court finds that in the present case, all of the events which gave
rise to C. Applicability of §6330 to this action Pursuant
to §6330, "no levy may be made on any property or right to
property of any person unless the Secretary has notified such
person in writing of their right to a hearing under this section
before such levy is made." 26 U.S.C. §6330 (Supp. 2001).
Section 6330 applies to all collection actions initiated after In the
present case, the Van
Es v. Comm'r of Internal Revenue [ D. Amdursky's and Koski's claim for damages under §7433 Section 7433 provides, in pertinent part, that if, in
connection with any collection of Federal tax with respect to a
taxpayer, any officer or employee of the Internal Revenue Service
recklessly or intentionally, or by reason of negligence disregards
any provision of this title, or any regulation promulgated under
this title, such taxpayer may bring a civil action for damages
against the 26
U.S.C. §7433(a) (Supp. 2001). This
claim requires little discussion. 6
Koski has failed to state a claim under §7433 because the record
is devoid of any evidence that any officer or employee of the For purposes of §7430, a party is not considered to be a prevailing party, and thus eligible for an award of attorneys' fees, if the United States establishes that its position in the proceeding was substantially justified. See 26 U.S.C. §7430(c)(4)(B)(i) (Supp. 2001). Amdursky
and Koski assert that the Court should award them attorneys' fees
under §7430 because, although informed from the outset that its
levy was invalid with regard to Amdursky's attorney's lien against
the settlement proceeds, the This
claim finds no support in the record. The In summary, Area Counsel has advised me that based upon existing case law and statutory interpretation, the Service filed a timely levy which attached to the taxpayer's unliquidated and unsettled tort claim, and that the levy is enforceable against the proceeds minus the one-third attorney's fee. See
Dkt. No. 46 at 10 (citing Furthermore,
it is clear from the record that the Accordingly, the Court concludes that Amdursky and Koski are not prevailing parties within the meaning of §7430 and, therefore, are not entitled to attorneys' fees under that statute. After carefully reviewing the file in this matter, the parties' submissions and oral arguments, and for the reasons stated herein, the Court hereby ORDERS that Defendant Amdursky's and Defendant Koski's motion for summary judgment is DENIED in its entirety; and the Court further ORDERS
that the ORDERS
that the Clerk of the Court pay the sum of $197,027.07, which is
currently held in the Court's Registry, to the ORDERS
that the Clerk of the Court enter judgment in favor of the IT IS SO ORDERED. 1
This cross-claim is no longer at issue because the 2
As part of its motion for partial summary judgment, the 3
The cases that Amdursky and Koski cite to support their Notice of
Seizure argument did not address this issue. In United States
v. Red Stripe, Inc. [92-1 USTC ¶50,277], 792 F.Supp. 1338 (E.D.
N.Y. 1992), the court found that the 4
Section Levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy, including receivables, bank accounts, evidences of debt, securities, and salaries, wages, commissions, or other compensation. 26 C.F.R. §301.6331-1(a)(1). 5 The Ninth Circuit's holding is consistent with Supreme Court decisions that have held that levy upon intangible property "is effected by serving the appropriate form upon the party holding the property or rights to property." G.M. Leasing Corp. v. United States [77-1 USTC ¶9140], 429 U.S. 338, 350, 50 L.Ed.2d 530, 97 S.Ct. 619 (1977) (citing Treas. Reg. §301.6331-1(a)(1), 26 C.F.R. §301.6331-1(a)(1) (1976)) (other citation omitted)). 6 The Court notes that if such a claim did exist, it would belong to Koski alone because he is the taxpayer. Thus, to the extent that the complaint can be read to include an independent claim on the part of Amdursky under §7433, this claim must fail. 7 Alternatively, the United States asserts that the Court does not have jurisdiction over this claim because Koski never filed an administrative claim for damages, which is a prerequisite to filing a suit for damages under §7433. Koski does not specifically address the issue of administrative exhaustion, although he claims that he repeatedly attempted to obtain an administrative review, due process hearing or appeals review of the issues surrounding the levy. The Court, however, need not determine whether Koski's requests satisfy the exhaustion requirement because, as noted, Koski has failed to establish a claim under §7433. 8
There is also no evidence to support Amdursky's and Koski's claim
that the 2002-1 USTC ¶50,423] Air Operations International Corporation, a Florida Corporation, Plaintiff v. United States of America, Defendant
Pablo R.
Bared, Bared & Assocs., 1500 San Remo Ave., Coral Gables, Fla.
33146, for plaintiff. Jose Francisco de Leon, Department of
Justice, ORDER
GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT KING, District Judge: This matter is before the Court upon the parties' cross-motions for summary judgment. The Court having heard the argument of the parties at a hearing held on April 12, 2002, and being otherwise fully advised, hereby GRANTS the defendant's motion and DENIES the plaintiff's motion for the following reasons: Air
Aruba (hereinafter also "taxpayer") was indebted to the Air
Operations International Corporation (hereinafter
"plaintiff") is a On
December 1, 2000, plaintiff obtained a Final Default Judgment
against Air Aruba in the amount of $1,080,116.74. This final
judgment was recorded in the public record of Plaintiff
filed this action in the Circuit Court for the 11th Judicial
Circuit in Section 6321 of the Internal Revenue Code (26 U.S.C.) provides that if any person liable to pay any tax neglects or refuses to pay it after demand, the amount "shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." Section 6322 provides that the lien imposed by Section 6321 "shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed . . . is satisfied or becomes unenforceable by reason of lapse of time." Section 6331(a) provides: If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax . . . by levy upon all property and rights to property . . . belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. This
federal tax lien has priority as of the date of assessment over
any claimant other than a purchaser, holder of a security
interest, mechanic's lienor or judgment lien creditor. As to these
latter claimants, in accordance with Section 6323(a) of the
Internal Revenue Code, the federal tax lien has priority as of the
date of filing of a notice of federal tax lien. Some claimants may
have priority, in accordance with Section 6323(b)-(d) of the
Internal Revenue Code, even though a notice of federal tax lien
has been filed. Air Plaintiff
commenced this action challenging the levy as wrongful. Section
7426(a) of the Internal Revenue Code permits an action against the
If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary. To
prevail in this action, plaintiff must establish that on Plaintiff has not and cannot establish that it had an interest that was senior to the interest of the United States when the levy was made. "Two basic principles govern the adjudication of priority of competing liens: (i) 'the first in time is the first in right'; and (ii) a federal tax lien is superior to a nonfederal lien that is inchoate." In re Haas [94-2 USTC ¶50,496], 31 F.3d 1081, 1085 (11th Cir. 1994). All attempts by the plaintiff to perfect its interest (whether pursuant to the security agreements or the final judgment) were made after October 30, 2000. The date
that is key for the determination of whether the levy challenged
by the Plaintiff was wrongful is the date the levy was made (that
is, This result is mandated by the controlling legal principles recognized by the Supreme Court in United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 731 (1985): In
the situation where a taxpayer's property is held by another, a
notice of levy upon the custodian is customarily served pursuant
to §6332(a). This notice gives the The administrative levy has been aptly described as a 'provisional remedy.'. . . In contrast to the lien-foreclosure suit, the levy does not determine whether the Government's rights to the seized property are superior to those of other claimants; it, however, does protect the Government against diversion or loss while such claims are being resolved. [85-2
USTC ¶9482], 472 U.S. at 720-21 (emphasis added). Once a levy has been made, Section 7426 is "the exclusive remedy against the United States for parties other than taxpayers complaining that their property has been levied upon." United Sand and Gravel Contractors, Inc. v. United States [80-2 USTC ¶9626], 624 F.2d 733, 740 (5th Cir. 1980). Thus, the rights of other claimants to the levied upon property are to be determined in the context of a wrongful levy action--and for a levy to be determined to be wrongful under Section 7426 the claimant must establish that at the time of the levy it had an interest or lien that was senior to the interest of the United States. Of course, at the time of the levy, Plaintiff did not have an interest or lien senior to the lien at issue. To allow someone who could not otherwise claim a senior interest at the time of the levy to assert that the levy was wrongful because at some time after the levy was made it perfected an interest in the property would violate the clearly established principles that the levy is justified by "the need of the government promptly to secure its revenues" and that the levy "does protect the Government against diversion or loss while such claims are being resolved." National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. at 721. Accordingly, the levy at issue was not wrongful and the plaintiff is not entitled to any relief pursuant to Section 7426 of the Internal Revenue Code. For the
foregoing reasons, it is hereby ORDERED 1. Plaintiff's Motion for Summary Judgment is DENIED; 2. Defendant's Motion for Summary Judgment is GRANTED. DONE 1 The defendant asserts that the execution of this security agreement (as well as of a security agreement dated October 31, 2000, and financing statements) by a Leo Maduro, purchasing manager for Air Aruba, was not properly authorized by Air Aruba. Because of the Court's rationale for granting defendant's motion, this factual controversy does not preclude summary judgment in favor of the defendant. 2
Section [2001-2 USTC ¶50,667] United States, Plaintiff v. Park Forest Care Center, Inc., Defendant U.S.
District Court, Dist. Colo.,
SPARR, Senior District Judge: THIS MATTER is before the court on the United States' Motion for Summary Judgment (filed April 10, 2001). The court has reviewed the motion; the Amendment to Motion for Summary Judgment (filed May 7, 2001), Defendant's Response (filed May 8, 2001), the entire case file, and the applicable law and is sufficiently advised in the premises. Background From March 1992 through March 1996 the Defendant employed Joanie B. Carlton as their financial comptroller. Upon Ms. Carlton's failure to pay personal income tax for the 1988 and 1989 tax years, a lien was imposed on her personal property. 26 U.S.C. §6321. Pursuant to 26 U.S.C. §6331(a), collection of the unpaid tax was authorized by levy upon Ms. Carlton's wages. Accordingly, a notice of the levy was personally served on Ms. Carlton's employer (the Defendant) by handing a copy of the "Notice of Levy on Wages, Salary and Other Income" to Defendant's bookkeeper, Ms. Bruner. The United States later brought this action against the Defendant for failure to surrender Ms. Carlton's wages pursuant to the Notice of Levy. See 26 U.S.C. §6332(d)(1). Standard
of Review Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Kimber v. Thiokol Corp., 196 F.3d 1092, 1097 (10th Cir. 1999). The moving party bears the initial burden of showing an absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir. 1991). Once the moving party meets this burden, the party resisting summary judgment must "come forward with specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 320; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). "The mere existence of some alleged factual dispute will not defeat an otherwise properly supported motion for summary judgment." FDIC v. Hulsey, 22 F.3d 1472, 1481 (10th Cir. 1994) (emphasis in original). In applying this standard, the court construes the factual record and any reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. Blue Circle Cement, Inc. v. Board of County Comm'rs., 27 F.3d 1499, 1503 (10th Cir. 1994). At the summary judgment stage, the court's function is not to weigh the evidence or find the truth, but to determine whether there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). "[T]he relevant inquiry is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.' " Bingaman v. Kansas City Power & Light Co., 1 F.3d 976,980 (10th Cir. 1993) (quoting Anderson, 477 U.S. at 251-52). Analysis Under 26 U.S.C. §6331(a), the United States is authorized to Collect unpaid tax liabilities through levy on a taxpayer's wages. A levy on wages is accomplished by serving a Notice of Levy on the taxpayer's employer. 26 U.S.C. §6331(a). To avoid personal liability, the employer (or any other third party in possession of property subject to levy) must, upon demand, surrender the property subject to levy. Kane v. Capital Guardian Trust Co. [98-2 USTC ¶50,491], 145 F.3d 1218, 1221-22 (10th Cir. 1998). Any person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the Secretary, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, together with costs and interest on such sum at the underpayment rate established under section 6621 from the date of such levy. 26
U.S.C. §6332(d)(1). Courts have recognized only two defenses to an action under 26 U.S.C. §6332(d): (1) that the defendant was not in possession of the property; and (2) that the property was subject to a prior judicial attachment or execution. United States v. Nat'l Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 721-22 (1985); Kane [98-2 USTC ¶50,491], 145 F.3d at 1221-22; Texas Commerce Bank-Fort Worth, N.A. v. United States [90-1 USTC ¶50,155], 896 F.2d 152, 157 (5th Cir. 1990); State Bank of Fraser v. United States [88-2 USTC ¶9592], 861 F.2d 954, 958-59 (6th Cir. 1988); United States v. Sterling Nat'l Bank & Trust Co. Of New York [74-1 USTC ¶9336], 494 F.2d 919, 921 (2d Cir. 1974); Bank of Nevada v. United States [58-1 USTC ¶9228], 251 F.2d 820, 824 (9th Cir. 1957). In this case,Defendant has not asserted either of the two recognized defenses. Instead, Defendant maintains that it lacked knowledge of the levy because the unopened Notice of Levy was forwarded directly to the Defendant's financial comptroller, Ms. Carlton, for enforcement and Ms. Carlton never informed the Defendant that a levy on her wages existed. A levy
may be imposed upon a taxpayer's intangible personal property
(including salary and wages) "by serving a notice of levy on
any person in possession of, or obligated with respect to,property
or rights to property subject to levy." 26 C.F.R. §301.6331-1(a)(1).
"The In opposing summary judgment, the nonmoving party may not rest upon the allegations in the pleadings. Fed. R. Civ. P. 56(e). Nor may a party defeat summary judgment by generalized, unsubstantiated affidavits or testimony that would be inadmissible at trial. Celotex, 477 U.S. at 324. When a motion for summary judgment is supported by depositions and affidavits, the party opposing it must respond with specific facts showing the existence of a genuine issue for trial as to the elements essential to the non-moving party's case. Matsushita Elec. Indus. Co., 475 U.S. at 586-87; Stevens v. Barnard, 512 F.2d 876, 879 (10th Cir. 1975). In this case, Defendant has not presented a single affidavit or deposition, or any other admissible facts, to rebut the sufficiency of the service on Ms. Bruner or to substantiate Defendant's assertion that she forwarded the unopened notice to Ms. Carlton. While it
is unfortunate that the employee responsible for enforcement of
the levy is the taxpayer against whose wages the levy was imposed,
Defendant admits that service was accomplished,in a manner that
comports with the applicable rules and statutory restrictions.
Defendant has not asserted either of the two recognized defenses
to an action under 26 U.S.C. §2336. Therefore, the court finds,
as a matter of law, that Defendant failed to surrender property
subject to an Accordingly, IT IS ORDERED that the United States' Motion for Summary Judgment is GRANTED as to liability. IT IS
FURTHER ORDERED that, pursuant to Fed. R. Civ. P. 72, this matter
is hereby referred to United States Magistrate Judge Schlatter for
determination of the amount of judgment and, in particular, any
applicable interest and/or penalties to be assessed. 2000-2 USTC ¶50,605] Joseph P. Schiaffino, Plaintiff v. Genuardi's Family Markets, Thomas McAloon, The United States of America, John C. Miller, B. Waller, N.J. Aiello, Coopers and Lybrand, L.L.P., Brian S. Katz, John F. McKee, Defendants U.S.
District Court, East. Dist. Pa.,
WEINER, Judge: Plaintiff
Joseph P. Schiaffino (hereinafter "plaintiff") brought a
pro se complaint, claiming that defendants Genuardi's
Family Markets and Thomas McAloon (hereinafter "Genuardi's")
improperly withheld federal income taxes from his wages while he
was an employee of Genuardi's, that defendants Coopers and Lybrand
L.L.P. and its agents Brian S. Katz and John F. McKee (hereinafter
"Coopers") improperly advised Genuardi's to withhold the
taxes from plaintiff's wages, and that defendant the United States
of America through the Internal Revenue Service and its agents
(hereinafter " Presently
before the court are motions to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6) filed by defendants Genuardi's,
Coopers, and the The court, in deciding a motion to dismiss for failure to state a claim, is required to accept as true all allegations of the complaint and must construe that complaint in favor of the complaining party. Birth v. United States 782 F.Supp. 289, 290 (M.D. Pa.), aff'd, (3d Cir. 1992). In the case sub judice, even accepting all of plaintiff's allegations as true, plaintiff has failed to state a claim upon which relief can be granted. Plaintiff
has been employed by Genuardi's since October, 1988. See
Complaint at ¶13. The Complaint alleges that plaintiff asked
Genuardi's not to withhold taxes from his wages. 1
Id. at ¶15. Genuardi's ceased withholding taxes from
plaintiff's wages but resumed withholding when the Under
the Internal Revenue Code, Genuardi's and Thomas McAloon are
shielded from liability to plaintiff for withholding his taxes.
Section 3403 of the Internal Revenue Code provides that "the
employer shall be liable for the payment of the tax required to be
deducted and withheld under this chapter, and shall not be
liable to any person for the amount of any such payment."
26 U.S.C. §3403. The statutory language is clear and unambiguous.
Furthermore, there are a number of cases in which the courts have
held that 26 U.S.C. §3403 provides employers with absolute
immunity from liability to their employees for any taxes withheld
from wages. See Pascoe v. We now turn to the motion to dismiss filed by Coopers and its agents. According to the facts alleged in the Complaint, Coopers was Genuardi's accountant and Brian S. Katz and John F. McKee were employees of Coopers. See Complaint at ¶¶10, 11, and 12. Plaintiff alleges in the Complaint that Brian S. Katz and John F. McKee, on behalf of Coopers, advised Genuardi's to ignore plaintiff's request to stop withholding taxes from his wages. See Complaint at ¶16. Plaintiff claims that these actions violated his civil rights and tortiously interfered with his contractual relations with Genuardi's. In order to state a claim under the civil rights laws, the plaintiff must show that the defendant acted under color of state law. In the case sub judice, plaintiff cannot prove that Coopers was acting under color of state law. Coopers was at all times acting in a private capacity as accountant for Genuardi's, also a private actor. See Complaint at ¶10. Neither Coopers nor its agents can be transformed into a state actor solely because of their relationship with a private entity. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). Furthermore, a number of courts have held that an employer does not act under color of state law when it withholds taxes from its employees' wages. Stouch v. Williamson Hospitality Corp., 22 F.Supp.2d. 431, 432-33 (E.D. Pa. 1998). Similarly, this court finds that Coopers did not act under color of state law and therefore cannot be held liable to plaintiff under the civil rights laws. In addition, the tortious interference claim against Coopers is barred by the statute of limitations. Pennsylvania has a two year statute of limitations for claims alleging intentional interference with contractual relations. Mazzanti v. Merck and Co., 770 F.2d 34, 35-36 (3d Cir. 1985). Plaintiff alleges in the Complaint that in a memorandum dated October 18, 1996, Coopers advised Genuardi's to ignore plaintiff's instructions to cease withholding. See Complaint at ¶16. Since plaintiff did not commence this suit until April 11, 2000, plaintiff's tortious interference claim against Coopers is barred by the two-year statute of limitations. Finally,
we turn to the motion to dismiss filed by the For the foregoing reason, the complaint is dismissed with prejudice. 1
This is not the first time that plaintiff has filed suit claiming
that he is not subject to withholding. In May of 1997, plaintiff
filed suit in this court against the 99-1 USTC ¶50,441] Arlie Chester Addington and Rena Sue Addington, Plaintiffs v. United States of America, U.S. Treasury Department, Internal Revenue Service and James Payton, individually, Defendants U.S.
District Court, So. Dist. W.Va., Charleston Div., Civ. 2:98-0376,
[Code Secs. 7422 and 7433
] Pending before the Court is the motion for summary judgment filed by Defendant United States of America. For the reasons set forth below, the defendant's motion for summary judgment is GRANTED. I.
Introduction GOODWIN, District Judge: Plaintiffs,
Arlie Chester and Rena Sue Addington, filed this action against
the United States of America, the Department of Treasury, the
Internal Revenue Service and Revenue Officer James Payton pursuant
to 26 U.S.C. §7433 for wrongful collection of taxes. Defendants (1) that
the (2) that
after they were unable to successfully compromise their tax
liabilities, the (3) that
the Plaintiffs seek an abatement and refund of tax, compensatory and punitive damages, attorney's fees and costs. Defendants deny plaintiffs' allegations and contend that plaintiffs owe federal income taxes for several tax years. The On April 18, 1995, plaintiffs filed a voluntary Chapter 7 bankruptcy petition in this district's bankruptcy court. In July 1995, the bankruptcy court issued the discharge order in the Addington's bankruptcy case. The bankruptcy case was closed in June 1996. In July 1996, plaintiffs provided Revenue Officer Payton with a collection information statement. Plaintiffs incorrectly believed this form to be an offer in compromise. After reviewing this form, Payton prepared an installment agreement and sent it to plaintiffs' attorney, Earnest Morton. In late
1996, Payton began levying on Mr. Addington's social security
benefits in order to collect a portion of the taxes owed. In June
1997, plaintiffs did submit an offer in compromise after which the
In
October 1997, the Plaintiffs contend in their complaint that they owe federal taxes for 1990 through and including 1994, but deny any liability for 1986. Plaintiffs claim that any alleged tax liability for 1984, 1985, and 1986 was discharged at the end of the bankruptcy case. Plaintiffs
filed this action on May 4, 1998, alleging reckless conduct by the
Pursuant to a scheduling order adopted by the Court, the defendant filed a summary judgment motion. All briefs now being submitted, this matter is ripe for decision. II.
Standard of Review To obtain summary judgment, the moving party must show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In considering a motion for summary judgment, the Court will not "weigh the evidence and determine the truth of the matter." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Instead, the Court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Although the Court will view all underlying facts and inferences in the light most favorable to the nonmoving party, the nonmoving party nonetheless must offer some "concrete evidence from which a reasonable juror could return a verdict in his [or her] favor." Anderson, 477 U.S. at 256. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The nonmoving party must satisfy this burden of proof by offering more than a mere "scintilla of evidence" in support of his or her position. Anderson, 477 U.S. at 252. In
support of its motion for summary judgment, defendant asserts that
plaintiffs cannot litigate the correctness of their tax liability
under the guise of a damage claim pursuant to 26 U.S.C. §7433 but
must follow the specific statutory provisions for contesting one's
tax liability. Defendants further assert that no In opposition to the motion, plaintiffs contend genuine issues of fact exist, prohibiting entry of summary judgment for defendants. In this
case, plaintiffs seem to suggest that the Section 7433 of Title 26 (U.S.C.) provides, in pertinent part, as follows: (a) In General--If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally disregards any provision of this title or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions. (emphasis
added). 26 U.S.C. §7433 was enacted as part of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, Sec. 6241(a), 102 State. 3342 (hereinafter "TAMRA"). Section 7433 is effective for actions taken by officers and employees of the Internal Revenue Service occurring after November 10, 1998, in connection with the collection of taxes. TAMRA at Sec. 6240(c). Section 7433 is a very limited waiver of the United States' sovereign immunity. Like any other waiver of that sovereign immunity, it " 'must be strictly observed, *** and construed in favor of the sovereign.' " Gonsalves v. Internal Revenue Service [92-2 USTC ¶50,474], 975 F.2d 13, 15 (1st Cir. 1992). Indeed, "[c]ourts may not 'enlarge . . . beyond what the language [of the statute creating the waiver] requires.' " Id. at 16 (citing Eastern Transportation Co. v. United States, 272 U.S. 675 (1927)). Section 7433 provides a civil remedy for violations of the Internal Revenue Code which occur in the course of collecting taxes. It is not a remedy for taxpayers alleging impropriety or errors in the tax assessment process. Miller v. United States [95-2 USTC ¶50,516], 66 F.3d 220, 222-223 (9th Cir. 1995) (Section 7433 does not extend to the erroneous or improper assessment of taxes), cert. denied, 116 S. Ct. 1317 (1996); Shaw v. United States [94-1 USTC ¶50,254], 20 F.3d 182, 184 (5th Cir.), cert denied, 115 S. Ct. 635 (1994). (based on plain language of Section 7433, a taxpayer cannot maintain an action under this statute for the improper assessment of taxes); see also White v. Commissioner, 899 F. Supp. 767, 772 (D. Mass. 1995). Thus, in
order to demonstrate a claim under Section 7433(a), a taxpayer
must prove, by a preponderance of the evidence, that the In this
case, plaintiffs suggest that the Accordingly,
the Court is of the opinion that plaintiffs' claim that the In their
complaint, plaintiffs' also allege that the The only mechanism to compromise a tax before referral to the Department of Justice is pursuant 26 U.S.C. §7122. Botany Worsted Mills v. U.S. [1 USTC ¶348], 278 U.S. 282, 49 S. Ct. 129, 73 L. Ed. 379 (1929); Yarborough v. U.S. [56-1 USTC ¶9295], 230 F.2d 56 (4th Cir. 1956). Section 7122 clearly states that the Secretary may compromise any civil or criminal tax case prior to referral to the Department of Justice. The decision to accept or reject a compromise offer is discretionary and cannot be compelled by any action. Carroll v. Internal Revenue Service [64-2 USTC ¶9687], 14 AFTR2d 5564 (E.D. N. Y. 1964). Plaintiffs'
complaint conveys the impression that plaintiffs submitted more
than one offer in compromise. Yet the record, through the
declarations of Revenue Office Payton, dictates only one was
submitted to the By
letter of July 30, 1997, the form was returned to plaintiffs by
the Plaintiffs
further contend that the revenue officer intentionally or
recklessly violated some Code provision when he served a levy to
collect Mr. Addington's social security benefits. Plaintiffs do
not allege violations of specific Code sections but merely
complain of The Internal Revenue Code provides for two ways to enforce collection of unpaid taxes. The first method permits the U.S.A. to initiate a plenary judicial proceeding pursuant to Section 7403 of the Code to foreclose a tax lien on property in which the taxpayer has a right, title or interest. The second method under the Code for enforcing collection of unpaid taxes is by seizure pursuant to levy under Section 6331. United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, at 720-21 (1985); accord Resolution Trust Corp. v. Gill [92-1 USTC ¶50,199], 960 F.2d 336, 340 (3d Cir. 1991). Plaintiffs
have failed to cite any specific Code provision or regulation
which Mr. Payton intentionally or recklessly violated in serving
the levy to collect taxes. In fact, the Internal Revenue Code
specifically authorizes a levy to collect taxes. 26 U.S.C. §6331(a).
Upon review of Mr. Payton's declarations, Mr. Payton's actions in
seeking to collect unpaid taxes were in observance of the Code,
not a violation of it. Indeed, it is the duty of the Similarly,
plaintiffs admit that they owed income taxes for tax years 1990
and 1992. (Compl, ¶32.) Despite this admission, they
surprisingly complain that an Plaintiffs
finally allege that in October 1997, the Upon review of the extensive exhibits submitted by plaintiffs in opposition to the summary judgment motion, plaintiffs have offered no evidence that these liabilities were in fact discharged in their bankruptcy case. On July 24, 1995, the Bankruptcy Court issued a discharge order in the Addington's bankruptcy case, and on July 31, 1995, it issued an amended discharge order. On June 11, 1996, the Bankruptcy Court issued a final decree in the Addington's bankruptcy case and closed the case. However, the discharge order did not specifically discharge the 1984 and 1985 tax liabilities. The amended discharge order provides that the debtors are released from "all dischargeable debts", including those "debts dischargeable under 11 U.S.C. §523". (Clarke Decl., Def. Mtn. for Summ. Judg., Ex. 3.) Following
these general principles of bankruptcy, in this case, Mrs.
Addington's 1984 and 1985 income tax liabilities would have been
considered discharged debts in the bankruptcy proceeding, unless
they were excepted from discharge pursuant to 11 U.S.C. §523(a)(1)(A)--(C).
Bankruptcy Rule 7001 defines the scope of rules governing
adversary proceedings in bankruptcy cases and specifically
provides that a complaint to determine dischargeability (item (6)
is an adversary proceeding. The Addingtons did not file a
complaint to determine dischargeability of their debts in their
Chapter 7 case. Accordingly, when the Addingtons received their
discharge, it was not clear whether their 1984 and 1985 tax
liabilities were, in fact, discharged. Even with questions arising
over their dischargeability, it is clear that the plaintiffs
possess no evidence that the The
Court notes that defendant's primary contention in its motion for
summary judgment centers around the fact that plaintiffs'
complaint is merely an action challenging the assessment of taxes.
This Court agrees with defendant's argument. The Court believes
this plaintiffs' action is merely a complaint challenging the
assessment of taxes. Accordingly, in order to challenge an
assessment of taxes, jurisdictional prerequisite must be met in
order for this Court to exercise jurisdiction. The taxpayer must
first fully pay the tax assessment, including interest and
penalties, and then timely file a claim for refund with the In order
to timely bring a suit for a tax refund under 28 U.S.C. §1345(a)(1)
and 26 U.S.C. §7422(a), the taxpayer must, in addition to
complying with the full payment rule set forth in Flora, supra,
timely file an administrative claim for refund with the In this
case, plaintiffs claim that the In light of the above, plaintiffs' claims for tax abatement or the return of money received pursuant to a tax levy must fail. Lastly,
the Court is of the opinion that the claim of plaintiffs for
damages for intentional or reckless violations of the Code by the Accordingly, there being no genuine issue of material fact and for the reasons set forth hereinabove, the Court finds that the U. S. is entitled to judgment as a matter of law with respect to plaintiffs' claims as alleged in their complaint. The Court GRANTS the defendant's motion for summary judgment and ORDERS that judgment be entered in favor of the defendant and that plaintiffs' action be Dismissed and Stricken from the docket of the Court. The Clerk is directed to mail copies of this Memorandum Opinion and Order to counsel of record herein. [99-1 USTC ¶50,280] Richard J. Scully, an Individual, Plaintiff v. Fireman's Variable Pension Fund, et al., Defendants U.S.
District Court, Dist. Ariz., Civ. 98-0121 Richard J. Scully, pro se. ORDER CARROLL, District Judge: Plaintiff,
acting pro se, commenced this action against the Internal
Revenue Service (" The
Court dismissed all defendants except the For the reasons discussed below, the Court will grant the United States' motion. I. Background Plaintiff Richard J. Scully currently resides in Phoenix, Arizona. He is a retired fireman from New York and has a vested interest in retirement funds managed by the Fireman's Variable Fund, a non-profit New York corporation. The Final
notices of intent to levy were mailed to Plaintiff on July 24,
1996. Plaintiff received the notices shortly thereafter, wrote
"Refused for cause without dishonor" on the documents,
and promptly returned them to the On
December 11, 1996, a notice of levy was served on Fireman's
Variable Fund. The notice of levy required the Fund to turn over
Plaintiff's retirement funds to satisfy his outstanding tax
deficiency. Fireman's Variable Fund honored the levy and turned
over the requested funds. Fireman's Variable Fund's compliance
with the Plaintiff
filed suit against the Plaintiff
alleges that the The
Court dismissed Plaintiff's claims against the Fireman's Variable
Fund pursuant to Fed. R. Civ. P. 12(b)(6), finding that the Fund
was absolutely immune from liability for honoring the The
United States now moves for summary judgment, asserting a cascade
of defenses to Plaintiff's complaint, including sovereign
immunity, failure to plead fraud and conspiracy with particularity
in accordance with Fed. R. Civ. P. 9(b), the Anti-Injunction Act,
and frivolousness. The United States also argues that Plaintiff's
claims are factually unsupported. The United States has submitted
a number of exhibits to show that the Plaintiff
does not respond to a number of the Government's asserted
defenses. He fails to address the contention that the Court lacks
subject matter jurisdiction because of sovereign immunity and the
Anti-Injunction Act. He also ignores the assertion that he failed
to plead claims of fraud and conspiracy with particularity.
Instead, he argues only that the II. Discussion Under
Rule 56(c) of the Federal Rules of Civil Procedure, summary
judgment is appropriate "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law." Fed. R. Civ. P. 56(c). The
party moving for summary judgment has the initial burden of
showing the absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A genuine issue
of material fact is one that affects the outcome of the litigation
and requires a trial to resolve. Anderson v. Liberty Lobby Inc.,
477 U.S. 242, 248 (1986); Once the moving party has presented evidence which, if undisputed, would be a basis for a directed verdict at trial, the burden then shifts to the non-moving party to show the existence of a genuine issue for trial. Anderson, 477 U.S. at 250. The non-moving party cannot simply rest on its allegations, but must offer significant probative evidence tending to support the allegations made in the complaint. Id. at 249. The non-moving party must present sufficient evidence to establish all essential elements of a claim. Id. at 251. There is no genuine issue for trial unless there is sufficient evidence favoring the non-moving party. If the evidence is merely colorable or is not sufficiently probative, summary judgment is proper. Anderson, 477 U.S. at 249-50. The Court on a motion for summary judgment must view the evidence before it "in the light most favorable to the opposing party." Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). This is a lawsuit against the United States and it is well-established that the United States may not be sued unless it has waived sovereign immunity. United States v. Dalm [90-1 USTC ¶60,012], 494 U.S. 596, 608 (1990). Waivers of sovereign immunity are narrowly construed and cannot be implied, but must be "unequivocally expressed." United States v. Nordic Village, Inc. [92-1 USTC ¶50,109], 503 U.S. 30, 33-34 (1992). The party bringing suit against the United States always bears the burden of proving that sovereign immunity has been waived. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 188 (1936). If the United States has not waived sovereign immunity, a court does not have jurisdiction over the underlying dispute. United States v. Mitchell, 445 U.S. 535, 538 (1980); Elias v. Connett [90-2 USTC ¶50,397], 908 F.2d 521, 527 (9th Cir. 1990); Gilbert v. DaGrossa [85-2 USTC ¶9665], 756 F.2d 1455, 1458 (9th Cir. 1985). Plaintiff does not challenge the United States' assertion of sovereign immunity. The Court agrees with the United States and finds that it has not waived its immunity from suit with respect to the bulk of Plaintiff's claims. Specifically, to the extent that the complaint seeks compensatory damages, imposition of a constructive trust, and an award of punitive damages, the United States has not expressly waived its sovereign immunity, and thus the Court does not have subject matter jurisdiction over any of these claims. Moreover, to the extent that Plaintiff is seeking injunctive relief from this Court to enjoin collection of a tax, Plaintiff's complaint is further barred by the Anti-Injunction Act, 26 U.S.C. §7421(a). The Anti-Injunction Act expressly deprives courts of subject matter jurisdiction to issue injunctions against the collection of taxes. It provides that "no suit for the purposes of restraining the assessment or collection of any tax shall be maintained in any court by any person." Id. In order to have subject matter jurisdiction over a claim for injunctive relief in a tax case, a plaintiff must show that the asserted claim falls within an exception to the Act. Neither
of the two statutory exceptions to the Anti-Injunction Act, set
forth at 26 U.S.C. §§6212(c)(1) and 6213(a), apply to this suit.
6
While a taxpayer may have an action under §6213(a) for injunctive
relief if the taxpayer never received a deficiency notice, see
Guthrie v. United States [92-2 USTC ¶50,391], 970 F.2d 733,
735 (10th Cir. 1992), Exhibits 5-12 of the United States'
Statement of Facts show that the A third
exception to the Anti-Injunction Act was established in Enochs
v. Williams Packing & Navigation Co. [62-2 USTC ¶9545],
370 U.S. 1 (1962). In Enochs, the Supreme Court held that
if the evidence shows that the Because Plaintiff has failed to show that his action falls within any of the three exceptions to the Anti-Injunction Act, 9 the Court does not have jurisdiction to rule on his request for injunctive relief. This is true also as to Plaintiff's request for declaratory relief. 10 Plaintiff
does raise colorable arguments about the procedures used by the The United States has expressly waived sovereign immunity for quiet title actions challenging procedural defects in connection with notification, assessment, and collection of unpaid taxes. See 28 U.S.C. §2410. However, the waiver is narrowly construed and does not entitle a taxpayer to contest the merits of the tax assessment underlying the lien. See Zimmer v. Connett [81-1 USTC ¶9223], 640 F.2d 208, 210 (9th Cir. 1981) (waiver of sovereign immunity found in §2410 must be construed narrowly and does not entitle taxpayer from using §2410 to challenge merits of tax assessment). Plaintiff's
claims of procedural irregularities in this case are without
merit. As noted above, the record establishes that the The
record further reflects that Plaintiff received a notice of intent
to levy no later than August 6, 1996. United States' Statement
of Facts, Exhibit 13. This notice is clearly timely, because
the notice of levy was not issued until December 11, 1996. 11
See 26 U.S.C. §6331(d) (requiring notices of intent to
levy be served at least thirty days prior to the issuance of a
notice of levy). In sum, the record reflects that the The
gravamen of Plaintiff's complaint is that the Accordingly, IT IS ORDERED granting the United States' motion for summary judgment. (Dkt. 26). IT IS FURTHER ORDERED denying as moot the United States' motion to strike. (Dkt. 36). IT IS FURTHER ORDERED that the Clerk of Court shall enter judgment in accordance with this order. JUDGMENT IT IS ORDERED ADJUDGED that this Court having granted Defendants' motion for summary judgment; Plaintiff take nothing. This complaint and action are hereby dismissed. 1 In the caption of the complaint, Plaintiff identifies the "Fireman's Variable Pension Fund" as a defendant, but elsewhere refers to it as the "Fireman's Variable Fund." It appears that the latter is correct name. 2 It is not clear whether a statutory notice of deficiency was sent to Plaintiff for the assessment for tax year 1979. However, the United States is no longer seeking to collect taxes to satisfy that assessment. 3 In his complaint, Plaintiff initially denied receiving the notices of intent to levy. Apparently, he has since abandoned this allegation. 4
In a letter to the 5
Plaintiff objects to the evidence submitted by the United States.
He contends that the declaration of James Bernatawicz is
"utterly untruthful" and that Bernatawicz failed to set
forth any facts supporting that he took the oath required under 28
U.S.C. §1746. He also complains that "fraud and deceit . . .
is rampant in the 6 These provisions prohibit assessment or collection of a deficiency during the ninety-day period during which the taxpayer may contest notice of deficiency through a petition to the Tax Court or during the period of time before the decision of the Tax Court on such claim is final. 7 Plaintiff contends that he never received the notices of deficiency. However, he offers no evidence from which the Court could conclude that he never received the notices. Likewise, he offers no evidence showing that the notices were sent to the wrong address. Plaintiff's contentions do not create an issue of material fact. See Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) (conclusory assertions in an affidavit that taxpayer did not receive notices of assessment do not establish that the notices were not sent). 8
9 In fact, Plaintiff does not even address the Anti-Injunction Act in his response to the Government's summary judgment motion. 10 The Declaratory Injunction Act ("DJA") provides that declaratory relief is available "except with respect to Federal taxes. . . ." 28 U.S.C. §2201. The purpose of the federal tax exception to the DJA is to protect the Government's ability to assess and collect taxes and to limit taxpayers to suits for refund. California v. Regan [81-1 USTC ¶9335], 641 F.2d 721, 722 (9th Cir. 1981). "The federal tax exception to the Declaratory Judgment Act is at least as broad as the Anti- Injunction Act." Id. at 723 (quotation omitted). 11 In his response to the United States' summary judgment motion, Plaintiff states that the Notice of Levy served on Fireman's Variable Fund was dated September 11, 1996. Although this appears to be a typographical error, the Court notes that the final notices of intent to levy were served more than thirty days prior to September 11, 1996 and would therefore still be timely. 12
The Court finds no authority for the proposition that Plaintiff is
entitled to a pre-levy hearing pursuant to 26 U.S.C. §6303(a) or
that the [98-1 USTC ¶50,299] Joseph T. Tornichio, Plaintiff v. United States of America, Defendant U.S.
District Court, No. Dist. Ohio, East. Div., 5:97CV2794, Joseph T. Tornichio, 798 Nome Ave., Akron, Ohio 44320, pro se. Alex E. Sadler, Department of Justice, Washington, D.C. 20530, for defendant. MEMORANDUM
OF OPINION MANOS, District Judge: On
November 3, 1997, Joseph T. Tornichio, plaintiff, filed this
action pro se seeking the refund of money he paid to the
Internal Revenue Service ("I.R.S."). In particular, he
seeks refund of amounts assessed against him by the I.R.S. as
penalties for filing frivolous income tax returns. On December 31,
1997. Defendant filed a Motion To Dismiss, to which Plaintiff
responded. The motion expresses an intent to seek sanctions
pursuant to Fed. R. For the reasons stated below, Defendant's Motion To Dismiss is GRANTED. It's Motion For Sanctions is GRANTED. I.
FACTS Plaintiff filed a 1994 federal income tax return indicating his employer had withheld a portion of his wages for the payment of his federal income taxes. Despite the fact he had wages, he claimed on the return he had no taxable income, and put the amount withheld on the lines for overpayment and refund. He provided an attachment alleging he owed no taxes essentially because: (1) nothing in the Internal Revenue Code ("Code") makes him "liable" for taxes, (2) the filing requirement violates his Fifth Amendment right against self-incrimination, and (3) "income" under the Code is limited to gains from corporate activities. In response, the I.R.S. assessed him a $500.00 penalty (which totaled $519.72 including interest) pursuant to 26 U.S.C. §6702 for filing a frivolous return. Plaintiff paid the penalty. He filed a similar return for his 1995 income, and again the I.R.S. assessed him a $500.00 penalty (which totaled $577.60 including interest). This time the I.R.S. removed the funds from his bank account via administrative levy pursuant to 26 U.S.C. §6331. The levy created an overdraft for the account, resulting in a $45.00 charge from the bank. Plaint seeks refund of the penalties and reimbursement of the overdraft charge. 1 Defendant characterizes this action as a patently frivolous "tax protester" suit. II.
LAW Defendant
has moved to dismiss because the Complaint fails to state a claim
upon which relief can be granted. See Fed. R. Conclusory allegations, however, are not sufficient to state a claim. Rather, a complaint must set forth specific facts which, if proven, would warrant the relief sought. Sisk v. Levings, 868 F.2d 159, 161 (5th Cir. 1989). In addition, a court is not bound to accept as true a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286 106 S. Ct. 2932, 2944 (1986). A court likewise need not accept unwarranted factual inferences. Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). Although pro se Complaints are held to less stringent standards than those filed by lawyers, they still must meet the basic pleading essentials. Wells v. Brown, 891 F.2d 591, 594 (6th Cir. 1989). The Code states a tax is "hereby imposed on the taxable income of every individual". 26 U.S.C §1 (emphasis added). "Taxable income" means gross income minus deductions permitted under the Code. 26 U.S.C. §63(a). "Gross income" means "all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services . . ." 26 U.S.C. §61(a). With certain exceptions not relevant here, the Code requires all individuals file a return indicating a self-assessment of tax. See 26 U.S.C. §6012. A penalty of $500.00 shall be assessed against any individual who files "what purports to be a return" which, inter alia, contains information on its face indicating the self-assessment is substantially incorrect, and is due to a position which is frivolous. 26 U.S.C. §6702(a). 2 Plaintiff challenges the I.R.S's conclusion that his returns fall within the penalty provision of section 6702(a). He also challenges the use of administrative levy to obtain payment of the second penalty. His arguments lack merit. A.
Assessment of the Penalties Plaintiff filed what he purports to be returns. The returns indicate he had wages withheld, but no taxable income. This contradiction "on its face indicates the self-assessment is substantially incorrect". See 26 U.S.C. §6702(a)(1)(B). Thus, the issue is whether the error is due to "a position which is frivolous" See 26 U.S.C. §6702(a)(2)(B). To deny his returns are frivolous, Plaintiff relies essentially on the same arguments he asserted in the attachments to his tax returns. In Sisemore v. United States [86-2 USTC ¶9576], 797 F.2d 268 (6th Cir. 1986), the Sixth Circuit upheld penalties in a case similar to this one. The plaintiffs amended a joint tax return to deny their wages and salary were taxable "income". They submitted a memorandum with the return in support of their position. The Court concluded the amended return on its face indicated the self-assessment was substantially incorrect. It also concluded their position that wages are not taxable is frivolous. Double costs and attorneys fees were assessed against them pursuant to Fed. R. App. P. 38 for filing a frivolous appeal. Id. at 270-71. Plaintiff's arguments are no less frivolous here. 3 First, Plaintiff argues the Code does not impose a tax "liability". The plain language of the Code belies this, stating the tax is "imposed". See 26 U.S.C. §1. He attempts to distinguish between "imposing" a tax and creating a "liability" for tax. The Court fails to see a difference. Individuals have an affirmative duty to pay taxes. Gabelman v. Commissioner of Internal Revenue [96-2 USTC ¶50,329], 86 F.3d 609, 611 (6th Cir. 1996). Plaintiff next argues the filing of a return violates his Fifth Amendment right against self-incrimination. 4 He relies on Garner v. United States, 424 U.S. 649 (1976). There, the Court held one may invoke the Fifth Amendment as to tax returns that would incriminate one for specific non-tax crimes, provided the privilege was claimed on the return. It does not stand for the proposition that the Fifth Amendment provides general protection against filing tax returns. Indeed, the Court reiterated the long-standing principle that the Fifth Amendment is not a defense to filing a return at all. Id. at 650, citing, United States v. Sullivan [1 USTC ¶236], 274 U.S. 259 (1927). In Brennan v. Commissioner of Internal Revenue [85-1 USTC ¶9130], 752 F.2d 187, 189 (6th Cir. 1985), the Sixth Circuit held the blanket assertion of the Fifth Amendment privilege as to tax returns is a "frivolous position". Plaintiff argues he is entitled to relief because the Code does not define income. The United States, however, is correct that "income" is afforded its every day usage as any gain derived from capital, labor, or both combined. See United States v. Richards [84-1 USTC ¶9130], 723 F.2d 646, 648 (6th Cir. 1983). In addition, the Code explicitly defines "gross income", from which taxable income is computed, as including compensation for services, i.e., wages. 26 U.S.C. §61(a); Charczuk v. Commissioner of Internal Revenue [85-2 USTC ¶9656], 771 F.2d 471, 473 (10th Cir. 1985); Perkins v. Commissioner of Internal Revenue [84-2 USTC ¶9898], 746 F.2d 1187, 1188 (6th Cir. 1984). Relatedly, Plaintiff argues "income" should be interpreted as limited to corporate activities, and not include wages. He relies on a series of Supreme Court cases rendered shortly after ratification of the Sixteenth Amendment, and which define the scope of corporate income. None of those cases, however, stands for the proposition that only corporate income is taxable. To the contrary, like Richards, supra, many of these cases state: "income may be defined as gain derived from capital, from labor, or from both combined". See, e.g., Bowers v. Kerbaugh-Empire Co. [1 USTC ¶174], 271 U.S. 170, 174 (1926); Merchant's Loan & Trust Co. v. Smietanka [1 USTC ¶42], 255 U.S. 509, 518 (1921); Eisner v. Macomber [1 USTC ¶32], 252 U.S. 189, 207 (1919); Doyle v. Mitchell Bros. Co. [1 USTC ¶17], 247 U.S. 179, 185 (1918); Stratton's Independence, Ltd. v. Howbert, 231 U.S. 399, 415 (1913) (emphasis added). In particular, in Southern Pacific Co. v. Lowe [1 USTC ¶19], 247 U.S. 330, 333-34 (1918), the Supreme Court quoted the income statute at the time as imposing a tax on "every person residing in the United States . . . upon the entire net income arising and accruing from all sources". Thus, the plain language of the authorities upon which Plaintiff relies belies his position. Plaintiff next argues he should not be penalized because his filings constitute "returns" within the meaning of the Code. He relies on cases holding a return containing all zeroes is still a "return". His argument misses the point. He has not been penalized for failing to file returns, but for filing frivolous ones. Section 6702(a) penalizes a frivolous filing of "what purports to be a return". He admits he filed what he purports to be tax returns. Courts have upheld penalties under section 6702(a) against returns in which the filer has improperly used zeroes or left lines blank. See Fuller v. United States [86-1 USTC ¶9332], 786 F.2d 1437, 1438-39 (9th Cir. 1986). In United States v. Kimball [90-1 USTC ¶50,124], 896 F.2d 1218, 1220 (9th Cir. 1990), relied on by Plaintiff, the Court stated a return containing all asterisks "might well be frivolous under section 6702"; vacated, United States v. Kimball [91-1 USTC ¶50,101], 925 F.2d 359, (9th Cir. 1991) (also stating section 6702 applies to any document which purports to be a tax return). B.
Administrative Levy Plaintiff also challenges the use of administrative levy to collect the second penalty. See 26 U.S.C. §6331. Courts have repeatedly upheld the use of administrative levy. See United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713 (1985); Capuano v. United States [92-1 USTC ¶50,163], 955 F.2d 1427, 1429 (11th Cir. 1992). In Harrell v. United States [94-1 USTC ¶50,137], 13 F.3d 232, 235-36 (7th Cir. 1993), the Court characterized a challenge to the levy process as "frivolous". Even the authorities relied upon by Plaintiff clearly indicate his arguments are without merit. Had he followed the plain language of the cases and statutes he cited in the attachments to his tax returns, and again in his brief in opposition, he would have realized his returns were frivolous. Accordingly, his action is dismissed. IV.
RULE 11 SANCTIONS Pursuant
to The nature of Plaintiff's claims is summed up in the similar case of Biermann v. Commissioner of Internal Revenue [85-2 USTC ¶9632], 769 F.2d 707 (11th Cir. 1985). The Court stated: "These arguments are patently frivolous, have been rejected by courts at all levels of the judiciary, and, therefore, warrant no further discussion." Id. at 708. The analysis above confirms the frivolousness of Plaintiff's Complaint. Defendant's request for sanctions is granted. It is no
excuse that Plaintiff is pro se. The plain language of his
own authorities should have demonstrated to him his position
has no merit. In addition, to the extent he believed himself to be
correct when he filed the Complaint, Defendant's motion to dismiss
clearly demonstrated his position is meritless. The motion to
dismiss also warned him of the possibility of sanctions.
Furthermore, pursuant to Numerous courts have imposed sanctions for filing and appealing claims similar to those here. See, e.g., Schoffner v. Commissioner of Internal Revenue [87-1 USTC ¶9198], 812 F.2d 292, 294 (6th Cir. 1987) (the Sixth Circuit has given notice that tax protester cases are sanctionable); Sisemore v. United States [86-2 USTC ¶9576], 797 F.2d 268, 270-71 (6th Cir. 1986) (sanctions imposed for claiming wages are not "income"); Stites v. Internal Revenue Service [86-2 USTC ¶9586], 793 F.2d 618 (5th Cir. 1986) (upholding Rule 11 sanctions); Coleman v. Commissioner of Internal Revenue [86-1 USTC ¶9401], 791 F.2d 68, 72 (7th Cir. 1986) (courts "regularly impose sanctions" in tax protester cases); Kelly v. United States [86-1 USTC ¶9388], 789 F.2d 94, 98 (1st Cir. 1986) ("courts have not hesitated to impose sanctions" in tax protester cases); Charczuk v. Commissioner of Internal Revenue [85-2 USTC ¶9656], 771 F.2d 471, 475-76 (10th Cir. 1985) (sanctions imposed for claiming income tax was unconstitutional and "income" is not defined); Hudson v. United States [85-2 USTC ¶9575], 766 F.2d 1288, 1292 (9th Cir. 1985) (sanctions imposed for claiming income tax is unconstitutional and asserting blanket Fifth Amendment privilege as to tax returns). The only
remaining issue is the amount of sanctions. Rule 11 provides for
the imposition of an "appropriate sanction", which does
not necessarily mean attorneys' fees and expenses. See The parties have not briefed what constitutes an "appropriate sanction". The United States has requested attorneys' fees and expenses as a sanction, but has not requested a specific amount or given reasons why such amount would be appropriate. Accordingly, the parties have five (5) days within which to provide an additional brief addressed solely to the amount of sanctions. V.
CONCLUSION Defendant's
Motion To Dismiss is GRANTED. Defendant's Motion For
Sanctions pursuant to IT IS SO ORDERED. 1 He has filed a separate action seeking refund of the amounts withheld from his wages for years 1994, 1995, and 1996. That case is before Judge Patricia Gaughan. 2 26 U.S.C. §6702(a) states in its entirety: If--(1) any individual files what purports to be a return of the tax imposed by subtitle A which--(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or (B) contains information that on its face indicates that the self-assessment is substantially incorrect; and (2) the conduct referred to in paragraph (1) is due to--(A) a position which is frivolous, or (B) a desire (which appears on the purported return) to delay or impede the administration of the Federal Income tax laws, then such individual shall pay a penalty of $500. (Emphasis added.) 3 The plaintiffs in Sisemore alleged wages constitute an equal exchange for labor, and thus are not "income". Mr. Tornichio does not make that specific argument here. 4 Plaintiff claims he is not asserting his right against self-incrimination, but rather his right not to be a witness against himself. The Court fails to see the difference. 5 Plaintiff's request for sanctions is DENIED. 98-1 USTC ¶50,207] James Cecil Wear, Jr., Plaintiff v. Internal Revenue Service, Defendant U.S.
District Court, East. Dist. N.C. West. Div., 5:97-CV-694-BR,
1/6/98 James Cecil Wear, Jr., 120 S. Ridge Dr., Dudley, N.C. 28333, pro se. Michael J. Salem, Department of Justice, Washington, D.C. 20530, for defendant. ORDER BRITT, Senior District Judge: This matter is before the court on defendant's motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Plaintiff filed a response. Defendant did not file a reply, and the time in which to do so has lapsed. The motion is thus ripe for decision. I.
BACKGROUND Plaintiff filed this complaint on 29 August 1997 and amended the same on 2 September 1997. The complaint alleges constitutional and civil rights violations by defendant in connection with attempts to collect income tax from plaintiff for 1994, 1995 and 1996. Plaintiff seeks damages, declaratory and injunctive relief, attorneys fees and a jury trial. Specifically, plaintiff challenges defendant's: (1) refusal to refund amounts withheld from plaintiff's paycheck despite plaintiff's claimed "foreign estate" status; (2) levy on plaintiff's Centura Bank account to collect a penalty assessed against plaintiff; (3) contact with plaintiff's employer regarding plaintiff's withholding status; (4) levy on plaintiff's State Employees Credit Union account; (5) levy on plaintiff's wages; and, (6) levy on plaintiff's state tax refund. (Compl. ¶¶15-20.) Defendant contends that this court does not have jurisdiction over plaintiff's claims and that none of these claims state a claim for which relief can be granted. II.
STANDARD For purposes of a motion to dismiss for failure to state a claim, the complaint is construed in the light most favorable to the plaintiff and its allegations are taken as true. As stated by the Supreme Court in Conley v. Gibson, 355 U.S. 41 (1957): In appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Id.
at 45-46. A motion to dismiss for lack of subject matter jurisdiction may attack the complaint on its face, in that the complaint fails to allege facts upon which the court can base its jurisdiction, or it may attack the truth of the allegations of the complaint. The party asserting subject matter jurisdiction has the burden to allege and prove such jurisdiction. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). Plaintiff's complaint attempts to assert a civil rights action pursuant to 42 U.S.C. §1983 and entitlement to attorney's fees under 42 U.S.C. §1988. (Compl. ¶¶3,C.) Section 1983 provides relief for violation under the color of state law and is simply inapplicable to these facts. See Mack v. Alexander [78-2 USTC ¶9559], 575 F.2d 488, 489 (5th Cir. 1978.) Plaintiff's civil rights claim will be dismissed. Because §1983 is not applicable, plaintiff is not entitled to recover attorney's fees pursuant to the related provision of §1988. Plaintiff
asserts claims against defendant under the First, Fourth, Fifth,
Eighth, Thirteenth and Fourteenth Amendments to the United States
Constitution. The defendant is a federal agency which has not
waived its sovereign immunity for damage claims under the
Constitution. Bivens v. Six Unknown Named Agents of Federal
Bureau of Narcotics, 403 U.S. 388 (1971); Gonsalves v. Plaintiff
has also stated a claim for defendant's alleged failure to pay
plaintiff a refund. There is no statute which waives the immunity
of the Plaintiff's
prayer for relief suggests that he seeks damages in tort for
"emotional distress, embarrassment, peonage and loss of
productivity." (Compl. ¶A.) The Federal Tort Claims Act,
while waiving sovereign immunity for tort claims against the
United States, does not waive immunity for any claim arising in
respect to the assessment or collection of any tax." 28 U.S.C.
§2680(c). The Fourth Circuit has interpreted §2680(c) to
preclude suits under the Federal Torts Claims Act against the Plaintiff also seeks injunctive relief to stop defendant from "invading Plaintiff's privacy." (Compl. ¶D.) Injunctions are available where the party seeking it can demonstrate (1) irreparable injury and (2) certainty of success on the merits. See Enochs v. Williams Packing & Navigation Co. [62-2 USTC ¶9545], 370 U.S. 1, 7 (1962). Certainty can be demonstrated only when "it is clear that under no circumstances could the government ultimately prevail." Id. Plaintiff cannot meet this difficult standard, and his claim for an injunction will be denied. Plaintiff also seeks a declaratory judgment that his "conclusions of status and jurisdiction are correct." (Compl. ¶E.) Declaratory relief is not available with respect to tax-related claims. 28 U.S.C. §22201(a). See also, Warren v. United States [89-2 USTC ¶9441], 874 F.2d 280, 282 (5th Cir. 1989) (federal courts cannot entertain declaratory relief in cases involving federal taxes). This court lacks jurisdiction over plaintiff's declaratory judgment claim and the same will be dismissed. As
stated above, plaintiff challenges defendant's levy procedures.
However, none of these challenge the procedural validity of the
levy under 26 U.S.C. §6331. For the Title 26
U.S.C. §7433 authorizes civil suits for actions against any IV.
CONCLUSION For the reasons stated above, defendant's motion to dismiss is ALLOWED and this matter is DISMISSED. [94-2 USTC ¶50,500] Robert Leady and Anna Leady, Plaintiffs v. United States of America, Defendant U.S.
District Court, No. Dist. W.Va.: Civ. 92-0094-C, Robert and Anna Leady, HC 70, Box 5, Auburn, W.Va. 26325, pro se. Daniel W. Dickinson, Jr., Assistant United States Attorney, Wheeling, W.Va. 26003, Gerald A. Role, Department of Justice, Washington, D.C. 20530, for defendant. MEMORANDUM
OPINION KEELEY, District Judge: Judge Keeley: The plaintiffs in this action seek a return of property, and to quiet title to that property, seized by Internal Revenue Service Officers to satisfy unpaid income taxes in the amount of approximately $90,000.00. The plaintiffs allege that the seizure was unlawful because no "warrant of Distraint" was obtained as required by 26 U.S.C. §6331 . The United States has moved to dismiss the case on the grounds that the statute cited by the plaintiffs has been amended, and a warrant is not required. Further, it states that the property has been sold and that the plaintiffs only remedy is to seek a refund from the Internal Revenue Service. The plaintiffs have also filed a motion for summary judgment. The motions have been fully briefed, and for the reasons stated below, the Court finds that the defendant's motion to dismiss should be GRANTED. The Pursuant to Court orders, on June 17, 1992, Mr. Fluharty and an employee seized a number of items from the Leadys, including a 1983 Dodge van, a 1984 Fort Diesel Truck and numerous tools. On September 16, 1992, Robert Leady demanded return of this property, plus pension funds that were seized later, alleging that the seizure was unlawful. Obtaining no relief, the Leadys filed this action, again demanding return of their property. In their
complaint, the plaintiffs cite to the Internal Revenue Code and
the supporting regulations from 1844 (14 The law has changed. 26 U.S.C. §3692 has been repealed and replaced by 26 U.S.C. §6331 , which authorizes the Secretary 1 of the Treasury to collect unpaid taxes by levy upon all property and right to property belonging to the taxpayer. 26 U.S.C. §6331(a) . The term levy includes "the power of distraint and seizure by any means." 26 U.S.C. §6331(b) . Neither the statute nor the implementing regulations at 26 C.F.R. §301.6331 require that a warrant of distraint be obtained, and there is no further distinction between the collector (now district director) and a deputy collector (now revenue officer). Boyajian v. United States [93-2 USTC ¶50,472 ], 825 F.Supp. 714 (E.D. Pa. 1993); United States v. Manufacturers National Bank [61-2 USTC ¶9701 ], 198 F.Supp. 157 (N.D.N.Y. 1961) (warrants of distraint have not been required since the enactment of the Internal Revenue Code of 1954). See also 26 C.F.R. §301.7701-91, authorizing delegation and redelegation of authority within the Treasury Department. Distraint, by definition, is an extrajudicial, common law form of self-help consisting of a "seizure and holding of personal property by individual action without intervention of legal process for the purposes of compelling payment of debt." Raffaele v. Granger [52-1 USTC ¶9321 ], 196 F.2d 620, 623 (3rd Cir. 1952). Black's Law Dictionary 628 (5th Ed. 1968). The power to distrain property, without judicial intervention, is granted by 26 U.S.C. §6331(b) , subject to the requirements of the notice of levy in §6331(d) . The actions taken in this case by the Internal Revenue Service agent complied with the law in all respects. Generally a motion to dismiss for failure to state a claim should not be granted unless it appears certain that the plaintiffs can prove no set of facts which would entitle them to relief. In considering a motion to dismiss, the Court should review the complaint in the light most favorable to the plaintiff. Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993). Even if the Court accepts as true the plaintiffs' allegation that no warrant of distraint was issued, they would not be entitled to relief because such a warrant was not required, and the levy and seizure provisions of the Internal Revenue Code were followed. It is, therefore, ORDERED that the plaintiffs' motion for summary judgment is DENIED, the defendants' motion to dismiss is GRANTED, and this civil action is dismissed and stricken from the docket of this Court. The Clerk is directed to mail certified copies of this Order to pro se plaintiffs and counsel of record herein. 1 Earlier versions of the statute authorized levies by "the Secretary or his delegate," but in the Tax Reform Act of 1976, the language "or his delegate" was dropped as "Deadwood" to simplify terminology, but the change was not meant to impact existing delegations of authority. 1976 U.S. Code Cong. Adm. News 2897, 4219-20. [94-1 USTC ¶50,206] Brice Nelson, Personal Representative of the Estate of John M. Nelson, Deceased, and Darrel Brant, Plaintiffs v. United States of America, Defendant Maxwell Tomlinson, Plaintiff v. United States of America, Defendant U.S.
District Court, East. Dist. Mich., So. Div., Civ. 92-70660, Civ.
92-77376, 3/30/94 GADOLA, District Judge: Plaintiff Maxwell Tomlinson is seeking to quiet title to some bearer bonds in his possession which are subject to tax levies issued by defendant United States. Plaintiffs Brice Nelson and Darrel Brant have brought an action under 26 U.S.C. §7426 , alleging that the United States wrongfully levied $73,125 in bond interest coupons. Based on a joint motion submitted by all parties, the court consolidated these two actions. Before the court are the parties' cross motions for summary judgment. For the reasons discussed below, the court will grant defendant's motion. I.
Background In 1981,
plaintiff Maxwell Tomlinson was assessed for tax liability for his
failure to file tax returns for the years 1969 through 1979. On After
the discharge, the Tomlinson
was later indicted and convicted for concealing his interest in
these bonds from the When
Tomlinson's fraud was discovered, the bankruptcy court set aside
its order granting the discharge on On On In October of 1990, John Nelson died in a plane crash. Plaintiff Brice Nelson is John Nelson's brother and the personal representative of John Nelson's estate. After getting out of prison, Tomlinson gave Brice Nelson $167,000 in interest coupons in partial payment of the $200,000 loan made by John Nelson. The remaining $33,000 of the loan was allegedly forgiven. Brice
Nelson then gave approximately $131,000 in interest coupons to
plaintiff Darrel Brant. The money was apparently given as a loan
for Brant's business. On On On Plaintiffs
have filed a joint motion for summary judgment based on their
claim that the statute of limitations on collection had expired
before the II.
Standard of Review Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment may be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "A fact is 'material' and precludes grant of summary judgment if proof of that fact would have [the] effect of establishing or refuting one of the essential elements of the cause of action or defense asserted by the parties, and would necessarily affect [the] application of appropriate principle[s] of law to the rights and obligations of the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984) (citation omitted) (quoting Black's Law Dictionary 881 (6th ed. 1979)). The court must view the evidence in a light most favorable to the nonmovant as well as draw all reasonable inferences in the nonmovant's favor. See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Bender v. Southland Corp., 749 F.2d 1205, 1210-11 (6th Cir. 1984). The movant bears the burden of demonstrating the absence of all genuine issues of material fact. See Gregg v. Allen-Bradley Co., 801 F.2d 859, 861 (6th Cir. 1986). The initial burden on the movant is not as formidable as some decisions have indicated. The moving party need not produce evidence showing the absence of a genuine issue of material fact. Rather, "the burden on the moving party may be discharged by 'showing'--that is, pointing out to the district court--that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party discharges that burden, the burden shifts to the nonmoving party to set forth specific facts showing a genuine triable issue. Fed. R. Civ. P. 56(e); Gregg, 801 F.2d at 861. To create a genuine issue of material fact, however, the nonmovant must do more than present some evidence on a disputed issue. As the United States Supreme Court stated in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986), There is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the [nonmovant's] evidence is merely colorable, or is not significantly probative, summary judgment may be granted. (Citations
omitted). See Catrett, 477 U.S. at 322-23; Matsushita
Elec. Indus. Co. v Zenith Radio Corp., 475 U.S. 574, 586-87
(1986). The standard for summary judgment mirrors the standard for
a directed verdict under Fed. R. Civ. P. 50(a). Anderson,
477 U.S. at 250. Consequently, a nonmovant must do more than raise
some doubt as to the existence of a fact; the nonmovant must
produce evidence that would be sufficient to require submission to
the jury of the dispute over the fact. Lucas v. Leaseway Multi
Transp. Serv., Inc., 738 F. Supp. 214, 217 (E.D. Mich. 1990), aff'd,
929 F.2d 701 (6th Cir. 1991). The evidence itself need not be the
sort admissible at trial. Ashbrook v. Block, 917 F.2d 918,
921 (6th Cir. 1990). However, the evidence must be more than the
nonmovant's own pleadings and affidavits. Id. Plaintiffs are seeking summary judgment based on their assertions that defendant improperly issued levies beyond the statute of limitations period and that proper procedures were not followed to perfect the levies. The court will address each issue in turn. A.
Statute of Limitations The
applicable statute of limitations is found at 26 U.S.C. section
6502(a)(1) . At the time that the tax was assessed, section
6502(a)(1) held that tax money could be collected by
levy issued "within six years after the assessment of the
tax." Id. The tax liabilities at issue in this case
were assessed between Normally,
the statute of limitations on collections would have run in 1987.
In this case, however, the limitations period was suspended when
Tomlinson filed his petition for bankruptcy on According
to plaintiffs, the limitations period was suspended from What
plaintiffs fail to realize, however, is that the Even if the limitations period were not suspended during the time that the discharge order was in effect, the principle of equitable estoppel would apply in this case. Tomlinson fraudulently concealed assets in a scheme to use the bankruptcy laws to discharge the taxes that he owed. The court cannot conceive of a more classic case where equitable estoppel would block the assertion of the statute of limitations. Plaintiffs are estopped from claiming that the tax levies are barred by the statute of limitations. B.
Levy Procedures Plaintiffs'
second argument is that improper procedures were used by the The issuance of tax levies is governed by 26 U.S.C. §6331 . Under section 6331(a) , [i]f any person liable to pay tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax . . . by levy upon all property . . . belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Id.
The levy "extend[s] only to property possessed and
obligations existing at the time" the levy is issued. Id.
§6331(b)
. The Plaintiffs
rely on Rev.
Rul. 75-355 , 1975-2 C.B. 478 in support of their claim
that the In the
special circumstances presented by this case, however, the court
finds that the levies issued by the The claims of plaintiffs Brant and Nelson are also without merit. The levies on the bonds and coupons were issued before either Brant or Nelson received the coupons from Tomlinson. Additionally, at the time that Brant and Nelson received the coupons, those coupons were subject to the government's pre-existing interest in the bonds based on the tax lien then in force under 26 U.S.C. §§6321 -6322. Plaintiffs
further argue that because the The
plaintiffs also claim that the levies, if they are proper, are
ineffective as to those coupons maturing after Finally, in their joint response to the government's motion for summary judgment, plaintiffs raise for the very first time the issue of Nelson and Brant's status as bona fide purchasers under 26 U.S.C. §6323(b)(1)(B) . Plaintiffs did not seek protection under this section in either their original or their amended complaint. The sole bases for plaintiffs Brant and Nelson's complaint were the expiration of the statute of limitations and the improper procedures used in issuing the levies. Their alleged status as bona fide purchasers under section 6323(b)(1)(B) did not appear in either complaint or in plaintiffs' joint motion for summary judgment. As a result, plaintiffs Brant and Nelson are too late in presenting this issue, and the court finds that they have waived this defense. IV.
Conclusion The
court finds that the ORDER IT IS FURTHER ORDERED THAT defendant's motion for summary judgment is GRANTED. Both complaints are DISMISSED on the merits. SO ORDERED. [91-2 USTC ¶50,538] United States of America, Plaintiff v. Michael J. Peloquin, Defendant U.S.
District Court, Dist. Ariz., Civ 90-0974
ROSENBLATT, District Judge: The
United States of America ("Plaintiff") brings this
action pursuant to 26 U.S.C. §§6331
and 6332
, which authorize the Internal Revenue Service (" I.
BACKGROUND This
case is based upon the The
Hinchcliffs are not parties to this action. On or about June 25,
1985, they were awarded a $25,000 judgment against the defendant
herein, Michael J. Peloquin. Approximately October 18, 1989, the The I.
INTRODUCTION Under 26
U.S.C. §6331(a)
, if any person liable to pay any tax neglects to do
so, the Any person who fails to surrender any property or rights to property subject to a levy under §6331 , shall be personally liable to the United States in the sum equal to the value of the property or rights not so surrendered, together with costs and interest on such sum. 26 U.S.C. §6332(d) . II.
DISCUSSION A. Sufficiency of Evidence for Summary Judgment In bringing a motion for summary judgment, the moving party bears the initial burden to show the absence of a material and triable issue of fact; the burden "then moves to the opposing party, who must present significant probative evidence tending to support its claim or defense." Richards v. Neilsen Freight Lines, 810 F.2d 898, 902 (9th Cir. 1987); Fed.R.Civ.P. 56(c). Unsubstantiated and conclusory allegations are insufficient to oppose a moving party's evidentiary showing under Fed.R.Civ.P. 56(e). Mitchel v. General Electric Company, 689 F.2d 877, 879 (9th Cir. 1982). Defendant claims that the figures provided by the United States as to the assessments are not correct, and the exhibits demonstrating recordation of the tax liens and mailing of the Notices of Levy to defendant are not proper. Plaintiff presented regularly kept records identified and attested to as such. Defendant does not offer any evidence indicating that the assessments are incorrect, the liens were not properly recorded, or that he did not receive the levy notices. Plaintiff has met its burden; defendant has failed to provide significant probative evidence tending to support his challenges. B. Validity of Levy As
plaintiff points out, Arizona law creates a creditor/debtor
relationship upon award of a judgment: a judgment debtor owes the
amount of the judgment to the party holding the judgment. Under §6332
, the Several cases have held that there are only two defenses to a government suit under §6332 : "that the person levied upon does not possess the delinquent taxpayer's property, and/or that the property is subject to a prior judicial attachment or execution. See Bank of Nevada v. United States [58-1 USTC ¶9228 ], 251 F.2d 820 (9th Cir.1957), cert. denied, 356 U.S. 938 (1958) . . . United States v. Trans World Bank [74-2 USTC ¶9632 ], 382 F.Supp. 1100 (C.D.Cal.1974)." United States v. Stephens [83-2 USTC ¶9704 ], 568 F.Supp. 1198, 1199 (N.D.Cal. 1983). See also United States v. Weintraub [80-1 USTC ¶9172 ], 613 F.2d 612, 620 (6th Cir. 1979); U.S. v. Marine Midland Bank, N.A. [88-1 USTC ¶9159 ], 675 F.Supp. 775, 778-79 (W.D.N.Y. 1987). Defendant does not contest the allegation that the Hinchcliffs obtained a judgment against him, nor does he offer any proof that he does not possess the judgment amount. Defendant's first available defense fails. Nor has defendant shown that the property is subject to a prior judicial attachment or execution. Defendant argues that the Hinchcliffs assigned their interest to Gary Yahnke. Defendant did submit copies of deposition testimony concerning the claimed assignment to Yahnke. As plaintiff points out, however, that testimony does not significantly contradict plaintiff's evidence showing that an assignment never actually took place. Even if such an assignment had occurred, there is no evidence that Yahnke ever obtained judicial authorization for attachment or execution. Defendant's second available defense also fails. C. Statute of Limitations Defendant
contends that the Defendant has failed to show that the two acceptable defenses are available to him. As to other defenses, this Circuit and other courts have held that the appropriate remedy for one upon whom a notice of levy has been served which he believes to be wrongful, is to surrender the property and bring an action against the government pursuant to 26 U.S.C. §7426 . 3 U.S. v. Badger [91-1 USTC ¶50,198 ], 930 F.2d 754, 756-57 (9th Cir. 1991) United States v. Weintraub [80-1 USTC ¶9172 ], 613 F.2d 612, 621, 622-23 (6th Cir. 1979). It has specifically been held that the statute of limitations is not a defense to a §6332 suit. United States v. Stephens [83-2 USTC ¶9704 ], 568 F.Supp. 1198, 1199 (N.D.Cal. 1983); Weintraub [80-1 USTC ¶9172 ], 613 F.2d at 620-21; U.S. v. Marine Midland Bank, N.A. [88-1 USTC ¶9159 ], 675 F.Supp. 775, 778-79 (W.D.N.Y. 1987). Even if the statute of limitations under 26 U.S.C. §6502 were a defense to a §6332 suit, it would not be a defense in this matter. The The judgment amount is below the amount of the 1981, 1983, 1987 and 1988 assessments; at the very least, the tax liens for 1981, 1987 and 1988 were in effect at the time of the levies against defendant; the defendant was indebted to the Hinchcliffs at the time of filing and refiling of the liens; and the "property" is still in the possession of defendant. The levies were timely. See U.S. v. Donahue Industries, Inc. [90-2 USTC ¶50,343 ], 905 F.2d 1325, 1329-30 (9th Cir. 1990); In re Carla Prosser Brafford, 189 Bankr. LEXIS 1306 (N.C. 1989). Defendant has failed to meet his burden of proof in raising any genuine issues of material fact. Further, Defendant has failed to raise any valid defenses to the government's suit to enforce its levy. For these reasons, plaintiff is entitled to summary judgment. Based on the foregoing, IT IS ORDERED THAT: Plaintiff's
Motion for Summary Judgment is granted in favor of the United
States and against the defendant, Michael J. Peloquin, in the
amount of $25,000, plus accrued interest as provided for by the Hinchcliff
judgment, and interest on such sum for defendant's failure to
honor levy at the under payment rate established under 26 U.S.C. §6621
from 1 Plaintiff's moving papers indicate assessments in 1981, 1983 and 1988. There is a tax lien indicating an assessment on February 23, 1987, but plaintiff does not refer to this assessment. 2 Section 6502 provides in relevant part: (a) Length of period.--Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun . . . (1)
within 6 years after the assessment of the tax 26 U.S.C. §6502(a)(1)
. A 1990 amendment of this section extended the period
in which a tax may be collected by levy or court proceeding from 6
years to 10 years, but that amendment does not apply to taxes
assessed prior to 3 Section 7426 provides in pertinent part: (a) Actions permitted.--(1) Wrongful levy.--If a levy has been made on property or property has been sold pursuant to a levy, any person . . . who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States . . . [71-2 USTC ¶9650]United States of America, Plaintiff-Appellee v. Homer Pittman; Helen Jakob, Defendants-Appellants, L. C. Christensen; Col. L. C. Christensen Investment Corp.; Kenosha Lumber Co., Inc.; Hazel Berry; Lillian Barrows; Acker Berknolz Co.; Joseph Costabile, d/b/a Racine Private Police; Ken-Crete Products Co.; Price Erecting Co.; John C. Whitcomb and Hilbert H. Heusser, d/b/a Whitcomb Building Movers; Daniel Anderson; Thomas Comber; Liberty Mutual Insurance Co.; Kenosha Boiler & Structal Co.; County of Kenosha, State of Wisconsin; and the State of Wisconsin, Defendants (CA-7),
U. S. Court of Appeals, 7th Circuit, No. 18652, 449 F2d 623, Johnnie M. Walters, Stephen Schwarz, Department of Justice, Washington, D. C. 20530, David J. Cannon, United States Attorney, Milwaukee, Wis., for plaintiff-appellee. Gerald T. Flynn, 310 Fifth Ave., Racine, Wis., for defendants-appellants. Before KNOCH, Senior Circuit Judge, CUMMINGS and PELL, Circuit Judges. PELL, Circuit Judge: The United States brought this action to foreclose federal tax liens against six parcels of real estate allegedly owned by the taxpayer Homer Pittman. 1 The district court ordered the liens foreclosed and the property sold to satisfy the tax claim. The taxpayer appeals contending that the tax has been satisfied by a prior levy on one of the six parcels. The issue presented is whether there was a levy effective to satisfy the tax. Certain
facts are not subject to dispute on this appeal. Pittman's income
tax liability to the United States was $34,085.25 plus interest.
Assessments of such taxes and demands for their payment were
legally made on The
particular dispute before us revolves around certain actions taken
by the Government with respect to one of the six parcels,
identified as Parcel No. 6. Prior to ". . . you are further notified that all property . . . now in your possession and belonging to this taxpayer . . . [is] hereby levied upon and seized for satisfaction of the aforesaid tax, . . . and demand is hereby made upon you for the amount. . . . Checks or money orders should be made payable to Internal Revenue Service." On The Government asserts that the issue before us is the narrow one of whether the receipt of the quitclaim deed constituted an administrative levy. As the factual situation appears to us, while we agree that the question is presented as to whether a levy was made, we cannot accept the narrowing circumscription to the deed transaction alone. After
taking the deed to Parcel No. 6, Revenue Officer Lyden maintained
insurance on the property until his retirement on It appears from the record that the rental payments, admittedly collected by the Government, were credited to tax liabilities of Pittman. No receipts were introduced into evidence but exhibits marked, "Certificate of Assessments and Payments" would seem to indicate that substantially all of the payments were credited not to Pittman's income tax liability but to his withholding tax (Social Security) liability, an account unrelated to the present dispute. The Government claims it was seizing only the rentals and not the property itself--the fruit but not the tree. However, their disposition of the fruit would seem to suggest the dispositive right of the owner of the tree. Unless the Government owned the tree, it is difficult to see how it took upon itself diverting the produce to a purpose other than for which it was supposedly taken. Following
Some fifteen months after the Service took the deed to Parcel No. 6 and assumed the prerogatives of ownership outlined above, and after much of the deterioration had taken place, the Service through a regional counsel wrote to Pittman advising him that the District Director had taken the deed to the property "to clarify the record title thereof . . . [but] . . . recognizes that you [Pittman] are equitable owner of this real estate." The letter then "recommend[ed] that you take whatever action you deem appropriate to maintain the value of the property and prevent waste." Transmitted with the letter was a real estate tax bill. The letter noted that the assessed value of the buildings appeared "greatly excessive" and advised Pittman to "take whatever action you deem appropriate." The letter contained no reference to the control or management that the Government had been theretofore exercising over the property. The two hands of the Government seemed to be quite unaware of the activities of each other. Lyden disclaimed all knowledge of the letter and, as indicated, if the regional counsel was aware of Lyden's activities he refrained from any mention thereof. Based on these facts, Pittman argues that the Government levied upon Parcel No. 6 and seized it and was then obligated to sell it and apply the proceeds to satisfy his tax liability. See 26 U. S. C. §6342. He contends that the sale of Parcel No. 6 would have produced more than sufficient funds to satisfy and extinguish his liability but that the Service, through a "bureaucratic malfunction," failed to sell the property as required by statute. He asserts that be cannot by penalized for this governmental error over which he had no control. It is clear that a valid and effective levy under Section 6331(a) of the Internal Revenue Code of 1954, 26 U. S. C. §6331(a), is "an absolute appropriation in law," and a seizure of the property levied upon, tantamount to a transfer of ownership. United States v. Sullivan [64-1 USTC ¶9392], 333 F. 2d 100, 116 (3d Cir. 1964); United States v. O'Dell [47-1 USTC ¶9190], 160 F. 2d 304, 307 (6th Cir. 1947); 26 U. S. C. §6331(b). It would seem beyond dispute that such a seizure to enforce the payment of a tax would violate the Fifth Amendment to the United States Constitution unless the taxpayer were actually given credit against his tax liability for the property so seized. See Springer v. United States, 102 U. S. 586, 593-594 (1880). Thus, if there was a valid levy, Pittman is entitled to credit on his tax liability for the seized property. It is possible to argue that the mere service of a notice of levy, as occurred here, constitutes a levy and seizure of the property of the taxpayer. See United States v. Eiland [55-1 USTC ¶9487], 223 F. 2d 118 (4th Cir. 1955) and United States v. Manufacturers National Bank [61-2 USTC ¶9701], 198 F. Supp. 157 (N. D. N. Y. 1961). 3 The Notice of Levy itself states that the property is "hereby levied upon and seized" and demands its surrender. Where cash is involved, checks are to be made payable directly to the Government. The Code also supports this position. Section 6331 provides that the tax is to be "collected" by a levy which is defined as a seizure by any means. Subsection 6331(c) entitled "Successive seizures," in its body authorizes successive levies. Under Section 6332(a), any person holding property levied upon is required to surrender possession of it to the Government without further proceedings of any kind. If he does not, he becomes liable for the tax, 26 U. S. C. §6332(c), while if he does, his liability to the taxpayer is extinguished, 26 U. S. C. §6332(d), indicating that following the levy it is the property of the Government, and not of the taxpayer. Where real property is levied upon and sold, the Government executes the deed to the purchaser and this deed conveys whatever interest the taxpayer had at the time the Government's lien attached. 26 U. S. C. §§ 6338(b) & 6339(b). Nowhere does the Code indicate any action beyond the levy itself which is necessary to place title in the Government to enable it to so convey it. Finally, the regulations promulgated pursuant to the Code provide that a levy is made simply "by serving a notice of levy." Federal Tax Regulations, §301.6331-1(a). From the above, it would not be difficult to conclude, with the Fourth Circuit, that "the service of such notice [of levy] results in what is virtually a transfer to the government of the [property levied upon]." Eiland, supra, 223 F. 2d at 121. However, Eiland involved the levy upon an intangible indebtedness rather than upon corporeal property as here and we would hesitate to extend its holding. Such a step is not necessary to the decision of this case. Here, the facts are plain that the Government went well beyond the mere service of a notice levy and actually seized control and dominion over Parcel No. 6. Where the Government serves notice of levy, compels transfer of legal title to itself and exercises the rights of an owner to control property by insuring it, renting it and compelling payment of rent to itself and no one else, so that the taxpayer justly concludes he has no further right to deal with the property, there has been an effective levy and seizure within the meaning of 26 U. S. C. §6331 and the taxpayer is entitled to credit for the property seized. Normally, there would be no question of this, for the Code directs that "as soon as practicable" following the levy and seizure of property the taxpayer is to be given notice of the seizure, public notice is to be given of the sale of the property and the property is to be sold not later than 40 days following such public notice. 26 U. S. C. §6335. The proceeds of such sale, minus certain prior charges, are then to be applied to reduce the tax liability which give rise to the levy. 26 U. S. C. §6342. Under this procedure there can be no question but that the property has been wrested from the taxpayer and that his liability has been reduced to reflect the seizure. While the Government effectively gave Pittman notice of the seizure by sending him copies of the levies upon Niesen and the tenants of Parcel No. 6 stating that the property had been seized and that rents were to be paid only to the Government, it did not follow through and sell the property, as required by the Code. Instead, it held it and permitted it to deteriorate in value. Its letter to Pittman some 15 months later appears to us nothing more than an attempt to cure its error by telling Pittman for the first time that it never intended to seize the property so that Parcel No. 6, in its deteriorated condition, was his problem. We do not conceive that the error of the Government and any loss resulting from it are attributable to the taxpayer. The Government asserts that Pittman testified that he first learned of the transfer to the District Director six months after it was a fait accompli. We are not certain what inference the Government desires us to draw from this assertion, assuming it to be true. Pittman, unless unusually careless about his receipts, must have been aware that neither he nor his alter egos were now receiving rental income. In any event, irrespective of when he first became aware of the transfer per se, we do not conceive he was under any duty to institute some type of mandamus proceedings to compel the Code-required sale. We see no reason for thinking that he would have had much success in stepping in to the picture of property management to prevent deterioration, at least prior to the letter from the regional counsel. Under such circumstances the taxpayer is entitled to a credit against his tax liability reflecting the value of the property at the time it should have been sold by the Government following its seizure. Because of its conclusion that Parcel No. 6 had not been legally seized, the district court made no findings as to its value. While
Pittman contends that the result we have reached necessarily must
be followed by his being entitled to credit in full for his income
tax liability plus a refund for an overpayment of some $30,000.00,
this position is based upon his contention that there was no
evidence contrary to that produced by his expert witness which
showed a fair market value of the property as of As the court observed in Jones v. N. V. Nederlandsch-Amerikaansche Stoomvaart M., 374 F. 2d 189, 190 (3rd Cir. 1966), cert. denied, Holland American Line v. Philadelphia Ceiling & Stevedoring Co., 388 U. S. 911 (1967), the opinion of an expert, even if uncontradicted, is not required to be accepted as such testimony must pass through the screen of the fact trier's judgment of credibility. We decide upon remand that it will be necessary to have a further hearing to determine (a) the fair market value of Parcel No. 6 as of the time that the property should have been sold pursuant to 26 U. S. C. §6335 and (b) in the event that value should be in excess of the income tax liability as of that date, who, if anyone, is entitled to make legal claim at this time for the excess credit. Further,
another problem has presented itself to which neither of the
parties on appeal has adverted. This arises from the fact that
there were two different dates involved in the assessments of
income tax liabilities. Notice of and demand for the tax as due
were mailed to the taxpayer on the assessment dates. The
assessments for the outstanding 1953-57 liabilities were made on Since the second set of assessments were made more than a year and a half after the levy date, it is not clear from the record before us as to how the 1961-64 liabilities could have been contemplated in a 1964 levy. The
total amount assessed on For the reasons stated, the judgment of the district court is vacated and the cause is remanded for further proceedings not inconsistent herewith. Vacated and Remanded. 1 This case relates solely to the tax liability of Homer Pittman. Helen Jakob, the other appellant, was a party below because legal title to some of the real property involved in the foreclosure action was in her name. The other parties set forth in the caption, who are not involved in this appeal, were named as party-defendants because they might have or claim an interest in the real estate. 2 The Internal Revenue Service position of Paul F. Lyden, who worked on collections for the Director of Internal Revenue from 1942 to 1968, is not entirely clear from the record. He signed a Notice of Levy with the title, "Revenue Officer." He is described as "Revenue Agent Lyden" in the Government brief. In any event, no question has been raised challenging his authority to act in the manner he did, as hereinafter described, and we do not conceive that the Government action in the particular area here involved can only be performed with binding effect by the Secretary of the Treasury. 3
With the above cases, compare |