Annotations- Effect of Honoring Levy Page4

---

 

 A. Minugh and Rice's Motion

Minugh and Rice move the Court to dismiss Plaintiff's complaint on the grounds that: (1) they are discharged from any liability to Plaintiff under IRC Section 6332(e) because they were acting within the scope of their employment with the EECU in receiving and honoring a Notice of Levy received from the Department of Treasury, which was directed against Plaintiff's property and rights to property held by the EECU; and (2) Plaintiff has alleged no basis for the personal or independent liability of Minugh or Rice.

In response to Defendants' "motion to dismiss," Plaintiff filed a motion to dismiss requesting that the Court:

dismiss defendant's "Motion to Dismiss" on the grounds that defendants disregarded the directives of Sections 6331 and 6332 of the Bureau of Alcohol, Tobacco and Firearms (BATF) portion of Title 26, Internal Revenue Code.

Plaintiff explains that:

The "improper seizure" of his funds occurred on 19 August 1988. . . . The defendants, . . . Minugh . . . and Rice, . . . were responsible for the processing of this seizure. . . . They had received IRS Form 668-A, "Notice of Levy" and were incorrectly instructed by IRS agent, M. Brown, to treat it as IRS Form 668-B, "Levy", which must be filed subsequently.

Plaintiff further argues that: (1) the IRS levy required the judgment of a court, which the IRS did not have ³; and (2) he was not given proper notice of the levy in accordance with IRC Section 6331(d) ⁴ because the Secretary of Treasury himself did not provide the notice, and the Secretary's agent (Brown) is required to provide a "Delegation of Authority" certifying the agent's authority ⁵.

1. IRC Section 6332(e)

IRC Section 6332(e) states:

EFFECT OF HONORING LEVY. Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made who, upon demand by the Secretary, surrenders such property or rights to property (or discharges such obligation) to the Secretary . . . shall be discharged from aby obligation or liability to the delinquent taxpayer and any other person with respect to such property or rights to property arising from such surrender or payment.

Defendants contend that they are discharged from liability under this Section because they properly honored the IRS Levy.

In response, Plaintiff suggests that no "demand" was ever made by the Secretary. However, Plaintiff attached a copy of the Notice of Levy from Brown to his Complaint. A personal demand from the Secretary is not required.

Plaintiff further suggests that Defendants improperly honored a Notice of Levy instead of an actual Levy. However, a notice of levy is the proper method of effecting a levy upon a bank account. ⁶ See, e.g., United States v. Donahue Indus., Inc. [90-2 USTC ¶50,343], 905 F.2d 1325, 1329 (9th Cir. 1990). Accordingly, Plaintiff's contentions fail, and Minugh and Rice are entitled to rely on Section 6332(e) as a complete defense to Plaintiff's action.

2. No Basis For Individual Liability

Minugh and Rice further argue that Plaintiff has alleged no basis for their independent liability because all of Defendants' actions took place within the context of their employment with the EECU, and under the doctrine of "manager's privilege" they cannot be held personally liable for acts performed on behalf of corporation for which they are officers, agents or employees. See, e.g., Marin v. Jacuzzi, 224 Cal.App.2d 549, 554 (1964).

In response to this argument, Plaintiff requests a certified description of Defendants' job duties at EECU, the specific privileges and statutory basis for the doctrine of "manager's privilege," and a copy of the contract between the Defendants and their attorney in this matter. Plaintiff, however, is entitled to none of this.

The Court agrees with Minugh and Rice that there is no basis for their individual liability, and, as mentioned above, they are entitled to rely on Section 6332(e) as a complete defense to Plaintiff's action. Accordingly, Minugh's and Rice's Motion to Dismiss is granted.

B. The United States '/Brown's Motion

1. United States As Proper Defendant

Plaintiff named M. Brown, an IRS employee, as a defendant in his complaint. The United States contends that Brown was acting within the scope of her employment at all times with reference to Plaintiff's allegations, and thus the United States is the proper defendant.

The United States ' contention is correct. So long as the judgment on a complaint would operate as a judgment against an individual defendant in her official capacity, the suit is considered to be one against the United States . See, e.g., Land v. Dollar, 330 U.S. 731, 738 (1947) (action is against the sovereign if the "essential nature and effect of the proceeding [is] such as to make plain that the judgment sought would expend itself on the public treasury or domain . . ."), overruled by implication on other grounds, Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682 (1949); Gilbert v. DaGrossa [85-2 USTC ¶9665], 756 F.2d 1455, 1458 (9th Cir. 1985) ("a suit against IRS employees in their official capacity is essentially a suit against the United States").

Plaintiff sued Brown because of her actions in issuing and enforcing the Notice of Levy. Clearly these actions fall within the scope of Brown's official duties, and any judgment against her would operate as a judgment against her in her official capacity. Thus, the United States , not Brown, is the proper party in this action.

2. Sovereign Immunity

The United States contends that the Court lacks jurisdiction to hear this matter because the United States has not waived sovereign immunity, and thus the Complaint must be dismissed.

Under the doctrine of sovereign immunity, the United States may not be sued without its consent. Gilbert, supra [85-2 USTC ¶9665], 756 F.2d at 1458. Where the United States has not consented to suit, the Court lacks jurisdiction over the subject matter of the action and dismissal is required. Id.

Here Plaintiff has not alleged that the United States has waived sovereign immunity. Nor did he point to any facts at the hearing to indicate that the United States has waived immunity. Accordingly, the United States is entitled to sovereign immunity, and the Court has no jurisdiction to hear Plaintiff's claim.

3. No Other Basis For Jurisdiction

The United States contends that no other bases for jurisdiction over this matter exists.

a. The Federal Tort Claims Act

The United States contends that the Federal Tort Claims Act ("FTCA") does not apply to waive sovereign immunity in this action because Plaintiff has alleged liability resulting only from tax collection, and the FTCA does not extend to any "claim arising in respect of the assessment or collection of any tax. . . ." 28 U.S.C. §2680(c). The United States further asserts that, even if Plaintiff could assert a claim under the FTCA, Plaintiff has not alleged the filing of an administrative claim for damages, which is a prerequisite to the waiver of sovereign immunity. See 28 U.S.C. §2675 ("An action shall not be instituted upon a claim against the United States for money damages . . . unless the claimant shall first have presented the claim to the appropriate Federal agency and his claim shall have been finally denied . . .") See also McNeil v. United States, 508 U.S. 106 (1993); Cadwater v. United States, 45 F.3d 297, 300 (9th Cir. 1995) ("The [FTCA] allows claimants to sue the government in district court provided that they first give the appropriate federal agency the opportunity to resolve the claim").

The government's contentions are correct. The FTCA does not apply to this case, and, even if it did, Plaintiff has not alleged that he has filed an administrative claim. Nor, in response to Defendants' contention at the hearing that Plaintiff had failed to file any administrative claim with respect to the matters presently at issue, did Plaintiff state that he filed any administrative claim before filing the instant action.

b. Tax Refund Claim

The United States contends that, although Plaintiff's complaint may be construed as an action for a tax refund, Plaintiff has not met the jurisdictional prerequisite for a tax refund suit because he has not alleged that he has fully paid the tax he seeks to recover. The United States further contends that the Court does not have jurisdiction to hear Plaintiff's complaint because he has not alleged that he filed an administrative claim, another prerequisite to jurisdiction.

Once again, the government's contention is correct. Plaintiff has not met the jurisdictional prerequisites to filing a tax refund claim because he has not alleged (nor can he allege) that he filed an administrative claim. See, e.g., 26 U.S.C. §7422(a) ("No suit or proceeding shall be maintained . . . for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected . . . until a claim for refund or credit has been duly filed with the Secretary. . . ."). Accordingly, the government's motion to dismiss is granted.

JUDGMENT TO BE ENTERED.

JUDGMENT IN A CIVIL ACTION

DECISION BY COURT: This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.

IT IS HEREBY ORDERED AND ADJUDGED that JUDGMENT IS ENTERED for Defendants and against Plaintiff.

¹ Plaintiff apparently intended this document to be an Opposition to Minugh's and Rice's Motion to Dismiss.

² Actually, the current jurisdictional amount in a diversity action is $75,000.

³ This contention is incorrect. See Maisano v. United States [90-2 USTC ¶50,399], 908 F.2d 408, 409 (9th Cir. 1990).

⁴ IRC Section 6331(d) provides that "Levy may be made ... upon the salary or wages or other property of any person with respect to any unpaid tax only after the Secretary has notified such person in writing of his intention to make such levy."

⁵ Plaintiff demands a delegation of authority certifying M. Brown's status. Plaintiff also contends that M. Brown's use of a pseudonym would violate Federal Rules 44, 56, 801, 803 and 28 U.S.C. §1783, and would nullify any document she signed including a "Delegation of Authority." Plaintiff's contentions are frivolous.

⁶ Plaintiff attempted to present authority to the effect that the Notice of Levy was not the appropriate form to effectuate the Levy. However, the authority cited by Plaintiff at the hearing is inapposite. See, e.g., Goodwin v. United States [91-2 USTC ¶50,323], 935 F.2d 1061 (9th Cir. 1991) (holding that actual notice of seizure was insufficient to comply with IRC Section 6335 requiring notice by certified mail).

 

[99-1 USTC ¶50,285] In re Ronald J. Allison and Martha J. Allison, Debtor. Ronald J. Allison and Martha J. Allison, Plaintiffs v. United States of America, Internal Revenue Service and Boilermaker-Blacksmith National Pension Trust, Defendants

U.S. Bankruptcy Court, Dist. Mont., 97-12264-7, 12/4/98, 232 BR 195

[Code Sec. 6332 ]

Levy and distraint: Notice of levy: Effect of compliance.--

Bankruptcy debtors' complaint against a pension trust for complying with an IRS levy was dismissed. Code Sec. 6332(e) precludes any cause of action based on a party's compliance with a proper levy.

[Code Sec. 6871 ]

Bankruptcy: Adversary claims: Prepetition tax liens: Pension funds: Discharge, effect of: Jurisdiction: Property not part of bankruptcy estate: Tax protestors: Invalid return.--

Chapter 7 debtors' post-discharge complaint challenging tax levies against postpetition pension payments and other assets was dismissed on summary judgment. The debtors had a vested interest in the pension funds to which tax liens had attached prior to the filing of their bankruptcy petition. Thus, the discharge that they received did not discharge their personal liability for the delinquent taxes. Moreover, their tax liabilities were nondischargeable obligations under section 523(a)(1)(C) of the Bankruptcy Code because they filed only invalid, "protest" tax returns for the tax years at issue. Finally, since all other property at issue had been sold at tax levy sales and all redemption periods had expired, the sales were final and the court had no jurisdiction over that property, which was no longer part of the bankruptcy estate.
[Code Sec. 7402 ]

Jurisdiction: Not pled: Anti-Injunction Act: Limitations: Laches by estoppel: Res judicata: Quiet title: No governmental interest.--

The bankruptcy court lacked jurisdiction over Chapter 7 debtors' post-discharge complaint challenging tax levies. Although the debtors alleged procedural defects in the levies, the court noted that jurisdiction to challenge the validity or amount of the various assessments, most of which were determined more than a decade previously, was both time barred and subject to laches by estoppel. While the debtors had timely challenged one of the many assessments, that matter was adjudicated in the Tax Court and its determination in favor of the government was res judicata on the issue. The court also did not have jurisdiction over a quiet-title action because, once the properties were sold to bona fide purchasers, the government no longer had the requisite interest in the assets.
[Code Sec. 7421 ]

Jurisdiction: Anti-Injunction Act.--

The Anti-Injunction Act barred Chapter 7 debtors' post-discharge complaint seeking to enjoin IRS collection activities.



Wrongful levy: Third parties: No interest in property.--

Married debtors did not qualify as third parties eligible to bring a wrongful levy action, since the husband was the affected taxpayer and his wife, who was found to be his nominee in a prior case, had no legally recognized interest in the property.

ORDER

PETERSON, Chief Bankruptcy Judge:

In this adversary proceeding, self-declared "non-taxpayers," and Chapter 7 debtors ("Debtors") filed a Complaint attacking the levy by the United States of America , Internal Revenue Service ("IRS") on the Debtors' pension payments. Debtor Ronald J. Allison ("Allison") was employed in the 1980s and was a member of the Boilermaker's Union . During his years of employment, Allison made contributions to the Defendant Boilermaker-Blacksmith National Pension Trust ("Trust"). During this same period, Debtors filed a 1983 tax return entitled "No Jurisdiction", reporting wages and other data as "Object" and noted Allison's social security number was "Revoked-Frdlnt Contract." Other years' filings were the same and unsigned. Thus, no returns by the Debtor were deemed filed for the years 1983, 1984, 1985, 1986, 1988, 1989, 1990, 1991, 1994 and 1995. Pursuant to 26 U.S.C. §6026(b), the IRS filed substitute returns and calculated the amount of taxes due based on employee forms 1099 and W-2s. Now, in their continuing broadside of the IRS, the Debtors have joined the Trust, seeking a determination that all levies against all property, seized and sold by the IRS pursuant to the Internal Revenue Code ("IRC") are illegal, and further seeking an injunction against the IRS to stop all future levies and return of $2,781.99 paid over by the Trust to the IRS by reason of the levies, ¹ for the period 1998. Additional levies secured the sum of 9,456.00 from November 1995 through October 1997. Debtors allege that all levies by the IRS, including those on the Trust, were "illegal, improper, void and filled with fatal procedural defects."

The present matter is before the Court on Debtors' request for preliminary injunction, a motion to dismiss or in the alternative, a motion for summary judgment filed by the IRS and a motion to dismiss filed by the Trust. After due notice, a hearing was held on these matters on November 9, 1998. Allison appeared pro se, the IRS was represented by assistant U.S. Attorney Victoria Francis, and the Trust was represented by its Montana counsel, Karl J. England. After the hearing, Debtors were granted an additional twenty days to file a supplemental memorandum, which Debtors filed November 30, 1998, and December 1, 1998. The matter is thus ripe for decision.

BACKGROUND

Debtors filed a Chapter 7 bankruptcy petition on August 27, 1997. ² Schedule "B" includes a list of interest in IRA, Keogh and other pension or profit sharing plans as "Boilermakers Pension Trust, Kansas City , KS (pension)" owned by the Husband [Allison], with current market value as "unknown." Schedule "C," "Property Claimed as Exempt" does not list the Trust. ³ Debtors' amended Schedule "E," "Creditors Holding Unsecured Priority Claims," lists the IRS for tax liability for the years 1983, 1984, 1985, 1986, 1988, 1989, 1990 and 1991 as disputed in the sum of $68,491.78 and the tax liability for 1994-95 as disputed in the sum of $1,312.00. The Chapter 7 Trustee abandoned all interest in the Debtors' property and discharge was entered on December 16, 1997. Throughout the Chapter 7 case, Allison, by motion, continued his assault on the IRS claims, which motions were rejected by Court Order as improper procedure. Debtors made no claim against the Trust and the case was closed as a no-asset case by Final Decree entered January 26, 1998. On July 31, 1998, Debtors filed a Motion to Reopen Chapter 7 Bankruptcy Case to pursue claims against the IRS and the Trust. The case was reopened by Order filed August 3, 1998, and this adversary proceeding was filed September 3, 1998.

The record shows by affidavits of IRS agents, exhibits by the IRS and Debtors and the allegations of the Complaint, that with the exception of one year (1988), the Debtors have never challenged, in the US Tax Court, or any other court, the Notice of Deficiency issued by the IRS for the tax years in question. As to the year 1988, that petition was filed February 5, 1991, and on December 31, 1991, the Tax Court entered an "Order of Dismissal and Decision" finding a deficiency of income tax for the year 1988 in the amount of $619.00. That decision was not appealed and is final. Thus, the amount of all tax assessments was uncontested by Debtors.

In addition, when the IRS sought an Order for Entry of Premises to effect levy pursuant to 26 U.S.C. §6331 in the United States District Court for the District of Montana, to which Debtors replied through a Motion to Quash Service and on other grounds, the Court on May 23, 1997, held:

28 U.S.C. §2410 allows taxpayers to file actions challenging the procedural aspects of tax liens, but not the merits of the underlying tax assessments. Arford v. United States [92-1 USTC ¶50,229], 934 F.2d 229, 232 (9th Cir. 1991). In his brief Allison claims he is only challenging the Internal Revenue Services' "failure to adhere to Congressionally mandated procedures." Thus, the appropriate means by which Mr. Allison can challenge the instant action taken by the IRS is by way of a separate action under 28 U.S.C. §2410, not by way of motion to quash.

Allison appealed to the Ninth Circuit Court of Appeals, No. 97-35560. The Judgment of the District Court was affirmed on April 2,1998, with the Court, in Memorandum, noting:

The District Court properly denied the motions because, Allison, who was not a party to the ex parte writ of entry proceedings, cannot use those proceedings as a forum for airing his assessment and collection grievances with the Internal Revenue Service. (citing cases).

Allison further challenged the levy and sale of real and personal property by filing an action against the purchasers of said property in Montana State District Court. That action was dismissed on October 29, 1997. Allison appealed to the Montana Supreme Court on June 9, 1998. That Court, in Cause No. 97-641 (unpublished), affirmed, stating the United States was an indispensable party, but not joined in the quiet title action. Allison's action was based on 28 U.S.C. §2410, and 26 U.S.C. §§7402, 7421 and 7422. The Court held Allison failed to allege the IRS has a mortgage or lien on the property in dispute which did not involve the Trust pension payments. Allison failed to correct the deficiency of the state court action.

In each of the tax years 1983-1991 (excluding 1988), a notice of deficiency was duly sent to Debtors stating they had 90 days to file a petition with the United States Tax Court for a redetermination of the deficiency, and failure to file within the 90 day period would result in a loss of a redetermination. Affidavit of Pat Taylor, with Exhibits. As noted above, Tax Court relief was sought by Debtors for tax year 1988, and denied in favor of the 1988 deficiency. For the tax years 1994 and 1995, assessments were made pursuant to 26 U.S.C. §6026(b) on August 27, 1996, but no enforcement action has been taken and no Federal tax lien recorded. Taylor affidavit p. 7.

The levy of the Trust funds was a continuing levy effective November 1, 1995. The levy was stayed by the IRS on September 3, 1997, due to the bankruptcy petition and began again on June 1, 1998. Release of the levy was made by the IRS when Debtors' case was reopened.

Summary Judgment under Bankruptcy Rule 7056, which adopts Rule 56, F.R.Civ.P., is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The United States Supreme Court has interpreted this standard to mean that summary judgment is not appropriate if "reasonable minds could differ as to the impact of the evidence." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (9186). Stated differently--

Evaluative judgment between two rationally possible conclusions from facts cannot be engaged in on summary judgment. Only where the facts supportive of a summary judgment can be held to have so unambiguously established the actualities of a situation as to leave no basis of substance for dispute as to their reality or as to the conclusion required from them is a summary judgment entitled to be entered. (Emphasis in original).

Chenette v. Trustees of Iowa College , 431 F.2d 49, 5 (8th Cir. 1970). The Court has considered all of the affidavits with attached exhibits, the Complaint and Debtors' exhibits attached to the memorandum of the Debtors and finds that matter may be disposed of by summary judgment on the facts and as a matter of law.

JURISDICTION

The only allegation of this Court's jurisdiction on the Complaint is in ¶7 that "[t]his action is commenced pursuant to the Internal Revenue Code (U.S.I.R.C.) and the U.S. Bankruptcy Code (11 U.S.C.) and other sections of the federal Codes (United States Code Annotated)." Debtors' Complaint fails, in this instance, to comply with F.R.B.P. 7008(c), which provides that the Complaint "shall contain a statement that the proceeding is core or non-core and, if non-core, that the pleader does or does not consent to entry of final orders or judgment by the bankruptcy judge."

Jurisdiction may attach under §505 of the Bankruptcy Code. In re Lipetzky, 3 Mont. B.R. 131, 135-36, 64 B.R. 431, 433-34 (Bankr. Mont. 1986) holds:

In reviewing Section 505 and the authorities cited by each party, as well as other decisions, there is no conflict among the decisions regarding the purpose and meaning of Section 505. The determination of a debtor's tax liability is a core proceeding under Section 157 of the Code and this Court thus has jurisdiction to determine the amount and legality of the tax, except where such tax has been fixed by final order of an administrative or judicial tribunal, after being reasonably contested by the taxpayer. (Emphasis added). In re Palm Beach Resort Properties, supra, [51 B.R. 363]. As stated in In re Northwest Beverage, Inc., supra, at 46 B.R. 634-635:

"Section 505 is derived from the Bankruptcy Act sections which allowed the Court to hear and determine questions concerning the amount or legality of unpaid taxes. (Citing authority).

Several Act cases have construed the language used in the predecessor Section to Section 505 to mean that:

'[W]here after a hearing, a quasi-judicial body--determines the amount of tax due, with the right on the part of the taxpayer to a judicial review of the determination, all confirmable with the requirements of due process, such determination, upon becoming final by operation of law, is conclusive upon a court of bankruptcy, for mathematical error in the computations of the amount of tax or legal error in its assessment.' (Citing cases).

* * * * *

Section 505 of the Bankruptcy Code and the predecessor section in the Act were enacted to '. . . protect[s] the estate from the negligence or indifference of a debtor who has defaulted in tax assessment proceedings--3) COLLIER ON BANKRUPTCY, 505-23 (15th Ed.). In enacting Section 505 Congress was primarily concerned with protecting creditors from the dissipation of the estate's assets which could result if the creditors were barred by a tax judgment which the Debtor, due to his ailing financial condition, did not contest. (Citing cases).

While the case of In re Piper Aircraft Corp., 171 B.R. 415 (Bankr.S.D.Fla. 1994) holds a debtor may challenge the merits of a state tax under §505 even though the debtor failed to challenge the assessment under applicable state law procedures, the holding of that case does not apply here. First, the Debtors' Complaint does not raise any issue as to merits, i.e., amount of the tax assessments by the IRS. Both the Complaint and the memorandum of Debtors allege 16 levy procedures which Debtors claim the IRS violated in collecting the tax on property other than pension benefits. Second, there is no issue here that the review of the merits of the tax assessments will cause dissipation of the Debtors' assets as the Chapter 7 case is a no-asset case. Third, while the grant of jurisdiction under §505 makes no reference to time periods as held in In re Ledgemere Land Corp., 135 B.R. 193, 196-97 (Bankr.D.Mass. 1991), the statute must be read in light of the federal statutes granting appeal rights of tax assessments to taxpayers. Debtors are now time barred under those federal statutes from seeking review of the amount of the tax assessments. Fourth, over a decade has passed since most of the tax assessments were determined by the IRS. Except for the year 1988, where the Debtors lost on appeal, the Debtors failed to attack each yearly assessment in a timely manner. Not only is the attack now time barred, but the Debtors are guilty of laches by estoppel. A failure to do something which should be done or to claim or perform a right at a prior time with knowledge of that right, as the Debtors had, is laches by estoppel. Hutchinson v. Kenney, 27 F.2d 254, 256 (4th Cir. 1928). Finally, as in other areas of the law, even though §505 sets no time frame, it is evident from the point of administration of the bankruptcy estate and fairness to the taxing authorities, the Trustee and other creditors that any challenge to the merits of the tax assessment must be made in a timely manner. See, e.g., Molina v. Rison, 886 F.2d 1124, 1131 (9th Cir. 1989).

The Debtors slept on their rights and have now no cause to complain about the validity or amount of each tax assessment. Section 505 is designed only to determine the amount or validity of a tax, not the levy and sale procedures used by the taxing authority to enforce payment of the tax.

Clearly, this Court had no jurisdiction to try the determination of the 1988 tax year assessment since that deficiency has been finally adjudicated pre-petition by the Tax Court. Hammers v. Internal Revenue Service (In re Hammers), 988 F.2d 32 (5th Cir. 1993).

Jurisdiction over the IRS cannot be claimed under 28 U.S.C. §2410, which states in relevant part, "the United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter--to quiet title to . . . real or personal property on which the United States has or claims a mortgage or other lien." The entire thrust of Debtors' Complaint and memorandum complains not about the procedure followed by the IRS in levy and attachment of the pension trust funds, but rather about the procedure dealing with the levy and sale of the muffler shop/real property/equipment of that business. By the plain terms of §2410, the United States must have a lien or mortgage in such property. That property, however, has been sold to bona fide purchasers and the IRS lien no longer exists. Further, as noted in Arford v. United States [92-1 USTC ¶50,229], 934 F.2d at 232, "[t]o the extent that the Arfords are challenging the amount assessed by the IRS under §6203, 28 U.S.C. §2410 does not serve as a waiver [of sovereign immunity]."

If this action seeks jurisdiction under 26 U.S.C. §7426, Ronald Allison is out of court. Section 7426 provides that "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 . . ." Obviously Ronald Allison ⁴ cannot sue under such section because he is the person "against whom is assessed the tax." Arford [92-1 USTC ¶50,229], 934 F.2d at 232. Thus, no jurisdiction lies under §7426. If Martha J. Allison is a Plaintiff, the claim for relief under §7426 as to her is baseless in fact. The record shows Martha Allison was title owner of the real property as the nominee of Ronald Allison. This matter of whether Martha Allison was nominee of Ronald Allison was settled by the Montana Federal District Court in Cause No. 97-8-Blg-JDS where the IRS sought its writ of entry. In that cause, the Revenue Office presented an affidavit (Exhibit "A" to Affidavit of Cindy A. Bouldin) detailing the nominee relationship, namely:

a. A close relationship between Ronald J. and Martha J. Allison as husband and wife.;

b. Ronald Allison exercises dominion, control and possession over this property;

c. Property was acquired in Martha Allison's name after the knowledge of taxes due;

d. Ronald J. Allison's name is listed on the utility bills of this commercial property.

The Federal District Court considered such evidence in issuance of the writ of entry. That matter has been adjudicated after Allison filed the motion to quash and lost on appeal. Thus, the issue is res judicata. Further, under §7426, as interpreted by Arford, supra at 232, Martha has no legally recognized interest in the real property as nominee. Even assuming Martha could establish a right to sue under §7426, the Plaintiff loses on the established facts in the record.

Section 6331(a) provides that if a taxpayer (or non-taxpayer) fails to pay the tax within 10 days after notice and demand, the IRS may collect such tax by levy. The 10 day notices were given for each tax year. Affidavit of IRS agent Bouldin and Exhibit "A." Then 26 U.S.C. §6331(b) allows seizure of the property. On March 6, 1997, pursuant to statute, the IRS seized both the real and personal property described in the state court action and now also contained in Allison's challenge in this adversary proceeding. The property was sold after notice to each Debtor and posting and advertisement of Notice of Sale. The sale occurred on August 20, 1997, when the City of Forsyth purchased the real property for $7,032,60 subject to a prior mortgage. Allison, in his memorandum filed December 1, 1998, complained the sale should have taken place in Rosebud County , rather than where it in fact took place, namely Yellowstone County . 26 U.S.C. §6335 provides:

The time of sale shall not be less than 10 days nor more than 40 days from the time of giving public notice under subsection (b). The place of sale shall be within the county in which the property is seized, except by special order of the Secretary.

The IRS issued a proper "Delegation Order", Form 10434, approving the sale in Yellowstone County as the Notice of Sale provided, thus satisfying §6335.

Debtors' personal assets were sold for $6,350.00 to another buyer. Those matters, still contested by Allison, are finished and complete. Allison had a right to redeem the personal property from sale up to the date of sale, 26 U.S.C. §6337(a), and redeem the real property 180 days after the sale. 26 U.S.C. §6337(b)(1). All redemption rights expired by the date of the bankruptcy petition or within 60 days of the petition date. Pursuant to 26 U.S.C. §§6338 and 6339(a)(1), the deed of conveyance and certificate of sale, given August 20, 1997, is prima facie evidence of the right to make the sale and conclusive evidence of the regular nature of proceedings in the case of the personal property and the facts set forth in the deed of conveyance.

Further, as to property sold on tax levy sales based on assessments in the other tax years, those sales are final and complete, leaving no property in the bankruptcy estate to be administered by the Trustee. All of the allegations in the case sub judice by the Debtors involving the sale of the muffler shop, the real property on which it is was situated and the personal property of the business are barred from determination under the doctrine of res judicata and the fact this Court has no jurisdiction over such property. As noted above, Debtors sought twice, once in Federal District Court and then in state court, to challenge the levy and sale. Debtors lost both times. In re Siegel v. Fed. Home Loan Mortgage Corp., 143 F.3d 525, 528-29 (9th Cir. 1998) states the applicable law:

The "doctrine of res judicata bars a party from bringing a claim if a court of competent jurisdiction has rendered a final judgment on the merits of the claim in a previous action involving the same parties or their privies." Robertson v. Isomedix, Inc. (In re Intl. Nutronics), 28 F.3d 965, 969 (9th Cir. 1994). Thus, " '[r]es judicata bars all grounds for recovery, that could have been asserted, whether they were or not, in a prior suit between the same parties on the same cause of action.' " Id. (alteration in original) (citation omitted). That applies to matters decided in bankruptcy. See id.

Both the Federal and state court decided Debtors' challenge to the levied upon property, and even if the procedure was incorrect, that is not important because Allison had the opportunity to properly raise the issue in the state court quiet title action against the IRS, but did not do so. As In re Intl Nutronics, Inc., 28 F.3d at 969 states:

Thus the [anti-trust] claim could have been asserted at the time of the proceeding confirming sale, and this opportunity is sufficient to satisfy that requirement of the doctrine of res judicata.

Equally important to such property interests, once the bankruptcy court determines such property is not property of the estate under §541 of the Bankruptcy Code, it lacks jurisdiction to determine issues relating to that property. United States v. Whiting Pools, Inc. [83-1 USTC ¶9394], 462 U.S. 198, 209-210, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), discussing the turnover provision of §542(a) of the Code states:

Of course, if a tax levy or seizure transfers to the IRS ownership of the property seized, §542(a) may not apply. The enforcement provisions of the Internal Revenue Code of 1954, 26 U.S.C. §§6321-6326 (1976 ed. and Supp. V), do grant to the Service powers to enforce its tax liens that are greater than those possessed by private secured creditors under state law.

Granting that such enforcement provisions do not transfer ownership of the property to the IRS, the Court nevertheless concluded:

Ownership of the property is transferred only when the property is sold to a bona fide purchaser at a tax sale. See Bennett v. Hunter, 9 Wall. 326, 336, 19 L.Ed. 672 (1870); 26 U.S.C. §6339(a)(2); Plumb, 13 Tax. L. Rev., at 274-275.

462 U.S. at 211, 103 S.Ct. 2317. Since the business assets have been sold to bona fide purchasers (a sale the debtor attempted to upset in the federal and state court proceedings, but lost), those assets cannot become property of the estate over which this Court may entertain jurisdiction.

As to the levy pre-petition on the pension funds, those funds by levy automatically become transferred to the IRS in payment of its lawful tax claim, thus leaving this Court without jurisdiction over such funds. United States v. Borock (In re Ruggeri Elec. Contracting, Inc.), 185 B.R. 750 (Bankr. E.D.Mich. 1995) (Bank account seized by levy by IRS pre-petition divested debtor of any identifiable interest in the money). Equally important, it is also the law that only the Chapter 7 trustee, not the debtor, would have any right to the funds if they were subject to recover. 11 U.S.C. §542. The debtor is simply not the real party in interest to seek the return of any of the seized property if such was possible.

This Court also lacks jurisdiction to issue an injunction to restrain the assessment on collection of taxes. 26 U.S.C. §7421(a). ⁵ The Supreme Court of the United States in Enochs v. Williams Packing & Navigation Co., Inc. [62-2 USTC ¶9545], 370 U.S. 1, 7-8, 82 S.Ct. 1125, 1129-30, 8 L.Ed.2d 292 (1962), described the application of the Anti-Injunction statute as follows:

The manifest purpose of §7421(a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund. In this manner the United States is assured of prompt collection of its lawful revenue.

* * * * *

Thus, in general, the Act prohibits suits for injunctions barring the collection of federal taxes when the collecting officers have made the assessment and claim that it is valid. Snyder v. Marks, 109 U.S. 189, 194, 3 S.Ct. 157, 160, 27 L.Ed. 901.

Arford v. United States [92-1 USTC ¶50,229], 934 F.2d at 231, fn 3 holds:

The Anti-Injunction Act, 26 U.S.C. §7421, is a further bar to suit against the government in federal court on taxpayers' claims that they do not owe taxes: the government cannot be enjoined from the collection of taxes unless the taxpayer timely proceeds through the administrative process in tax court. See Elias v. Connett [90-2 USTC ¶50,397], 908 F.2d 521, 523 (9th Cir. 1990) (discussing Anti-Injunction Act and its narrow exceptions).

Thus, Debtors' claim for relief in the form of an injunction is without basis in law as this Court is without jurisdiction. Id.

Moreover, as noted above, Debtors had the opportunity and right to challenge the assessments in the Tax Court by petition filed within 90 days of the Notice. Except for the tax year 1988, Debtors failed to avail themselves of that statutory right. But that may not end their challenge. Debtors had another avenue to attack the merits of each assessment. The taxpayers could have paid the tax and filed suit for refund. 26 U.S.C. §6511(a). If no return was filed, the claim must be filed within two years from the date the tax was paid. Id. For the tax years on which the IRS now seeks collection by levy, that 2 year period has passed and the assessment is final and binding on Debtors. As noted above, the merits of any refund suit cannot now be resurrected by §505 of the Bankruptcy Code.

What debtors' rights urged in the Complaint are thus left for this Court's jurisdiction? As I view the entire record, the only issue remaining is whether the IRS tax lien arising pre-petition can attach to the post-petition pension payments in view of the discharge entered by the Court in the Debtors' Chapter 7 bankruptcy proceeding. On that issue, this Court has jurisdiction under 28 U.S.C. §1334 and it is a core proceeding under section 28 U.S.C. §157(b)(2)(I) and (K). ⁶

FEDERAL TAX LIEN LEVY AGAINST PENSION PAYMENTS

As noted above, 26 U.S.C. §6321 establishes a federal tax lien when a taxpayer, such as Debtors, refuses to pay such tax after demand. Section 6321 attaches to "all property and rights to property, whether real or personal" belonging to the debtor. This statutory grant is "broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have . . . 'Stronger language could hardly have been selected to reveal a purpose to assure collection of taxes.' " United States v. Nat'l Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 719-20, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985) (relying on Glass City Bank of Jeanette, Pa. v. United States [45-2 USTC ¶9449], 326 U.S. 265, 267, 66 S.Ct. 108, 90 L.Ed. 56 (1945)).

The tax lien under section 6321 is created at the time the assessment is made and continues until the liability is satisfied or becomes unenforceable due to the passage of time. 26 U.S.C. §6322. Nat'l City Bank [85-2 USTC ¶9482], 472 U.S. at 719. It is therefore axiomatic that the tax lien attaches to the taxpayer's property and rights thereon as of the moment of assessment and, with one exception hereinafter discussed, attaches to any property coming into the taxpayer's possession after assessment. See, Tillery v. United States (In re Tillery), 204 B.R. 575, 576 (Bankr. E.D.Okl. 1996). The lien does not attach to property or rights to property acquired by the debtor after a petition in bankruptcy is filed where the tax liability is discharged personally against the debtor. United States v. Sanabria [70-1 USTC ¶9363], 424 F.2d 1121 (7th Cir. 1970); Leavell v. United States (In re Leavell), 124 B.R. 535, 540 (Bankr. S.D.Ill. 1991). Despite discharge of personal liability, a valid IRS tax lien passes through the Chapter 7 estate unaffected as to the Debtor's property rights which were attached prior to the filing of the bankruptcy petition. Dewsnup v. Timm, 502 U.S. 410, 417, 112 S.Ct. 773, 116 L.Ed.2d 903) (1992); Isom v. United States (In re Isom) [90-1 USTC ¶50,216], 901 F.2d 744 (9th Cir. 1990); Braddock v. United Stares (In re Braddock), 149 B.R. 636, 637 (Bankr. Mont. 1992). Isom holds:

The liability for the amount assessed remains legally enforceable even where the underlying tax debt is discharged in the bankruptcy proceeding. A discharge in bankruptcy prevents the I.R.S. from taking any action to collect the debt as a personal liability of the debtor. The debtors concede, however, that their property remains liable for a debt secured by a valid lien, including a tax lien. (Citing cases).

Isom [90-1 USTC ¶50,216], at 745. This issue really becomes what levy rights existed pre-petition which allow the tax lien to be enforced despite discharge. That issue is not really difficult in the case sub judice for two reasons. First, the Debtors' discharge did not discharge the Debtors' personal liability for the unpaid income taxes. As described above, it is undisputed that Debtors failed to file proper tax returns for the years in question. Under §523(a)(1)(C) of the Code, an Order of discharge does not discharge an individual debtor from any debt--

(1) for a tax or a custom duty--

(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.

Debtors purposely and willfully tried to evade taxes legally due by failing to file any proper return since 1977, and when he did file a document, there were no signatures or earnings information on the returns, only the word "Object." United States v. Hoffman, 643 F.Supp. 346, 348 (E.D.Wis. 1986); In re Schmitt v. United States (In re Schmitt) [92-2 USTC ¶50,315], 140 B.R. 571, 572 (Bankr. W.D.Okl. 1992); Slater v. United States (In re Slater), 96 B.R. 867, 868 (Bankr. C.D.Ill. 1989). All these cases stand for the legal principle that "protest" tax returns, with meritless objection, unsigned, are not lawful tax returns, and thus are nondischargeable debts under §523(a)(1)(C). Thus, Debtors' personal liability for the taxes due under the assessments made by the IRS still exists and allows the IRS to levy the Debtors' post-petition property or rights to property.

But even if it could be argued by some fathom of Allison's warped and crabbed mind that the personal liability for the taxes were discharged, Allison still loses the argument. It is universally held without exception that state law controls the nature of the debtor's property interests and rights. Nat'l Bank [85-2 USTC ¶9482], 472 U.S. at 722, citing United States v. Bess [58-2 USTC ¶9595], 357 U.S. 51, 55, 78 S.Ct. 1054, 2 L.Ed.2d 1135 (1958) (The tax lien created by §6321 "creates no property rights, but merely attaches consequences, federally defined, to rights created under state law."). Once, however, the state law rights have been determined and an interest in property rights has been found, state law is thus satisfied and now federal law determines the consequences. Nat'l Bank [85-2 USTC ¶9482], 472 U.S. at 722; Raihl v. United States (In re Raihl) [93-1 USTC ¶50,290], 152 B.R. 615, 617 (9th Cir. BAP 1993).

In Montana , Mont. Code Ann. §1-1-205 defines terms relating to property as including "(1) 'Personal property' means money, goods, chattels, things in action and evidence of debt." Indeed, that the pension funds are property of the debtor under state law is conceded by the allegations of ¶¶17 and 32 of the Complaint which state by admission that Plaintiffs' property both real and personal include Ronald J. Allison's pension fund payments and seizure by the IRS of the pension fund proceeds constitutes and unlawful interference with and depreciation of "Plaintiffs' right and possessory interests in that property." Morever, as held in Nat'l Bank [85-2 USTC ¶9482], 472 U.S. at 725, the "unqualified contractual right to receive property is itself a property right", even though the right to payment has not yet matured. I conclude that by Montana law, Allison has a property right, matured pre-petition, to receipt of the pension benefits.

Having so found that Allison has a vested interest in the pension funds and the right to receive future post-petition payments, that ends the state law inquiry, and the Court now must turn its attention to the federal enforcement right of the IRS. It is firmly established in uniform case law that a "federal tax lien attached to a then existing right to receive property in the future." In re Wesche [96-1 USTC ¶50,265], 193 B.R. 76, 77 (Bankr.