970 F.2d 750 (10th Cir. 1992), 91-8056, James v. United States

Docket Nº:91-8056.
Citation:970 F.2d 750
Party Name:Ronald JAMES, Plaintiff-Appellant, and Kay James, Plaintiff, v. UNITED STATES of America, Defendant-Appellee.
Case Date:July 23, 1992
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 750

970 F.2d 750 (10th Cir. 1992)

Ronald JAMES, Plaintiff-Appellant,

and

Kay James, Plaintiff,

v.

UNITED STATES of America, Defendant-Appellee.

No. 91-8056.

United States Court of Appeals, Tenth Circuit

July 23, 1992

Page 751

Ronald James, pro se.

Shirley D. Peterson, Asst. Atty. Gen., of counsel, Richard A. Stacy, U.S. Atty., Gary R. Allen, Charles E. Brookhart and Curtis C. Pett, Attys., Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Before LOGAN, BARRETT and EBEL, Circuit Judges.

LOGAN, Circuit Judge.

Ronald and Kay James (plaintiffs) appeal summary judgment against them in their quiet title action against the United States under 28 U.S.C. § 2410. Although plaintiffs claimed procedural irregularities in the tax levy on Mr. James' wages, the district court found that the case was, at heart, a challenge of the tax liability for which the levy was established and held that it had no jurisdiction to hear the matter. It then entered summary judgment in favor of the United States. 1

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Mr. James did not file income tax returns for the years 1981 and 1984. The federal Internal Revenue Service (IRS) determined tax deficiencies against Mr. James, sent notice of deficiencies, and, when Mr. James did not pay the deficiencies, issued notices of assessment and demands for payment. When Mr. James failed to pay the tax assessment, the IRS issued notice of intent to levy on Mr. James' wages and sent notice of levy to his employer. Mr. James filed a request for certificate of release of federal tax liens with the IRS, claiming that (1) the Commissioner of Internal Revenue lacks authority to administer the tax laws; (2) the IRS procedures for deficiency and assessment were insufficient because the notices of deficiency do not bear the statement that IRS personnel have examined Mr. James' tax return and determined a deficiency therefrom and because the notices of deficiency do not bear a pen and ink signature; (3) the IRS assessment was not based on a proper "return" filed by or on behalf of Mr. James; and (4) the information collection requests used in preparation of the notice of deficiency [which Mr. James claimed he did not receive] were invalid under the Paperwork Reduction Act of 1980. The IRS denied the request because "[t]he intent of the appeal process is to correct any erroneous filing of Notices of Lien and is not to be used for the purpose of disputing the calculation of tax, penalty or interest." I R. tab 1, ex. D.

Plaintiffs then brought this action against the United States seeking a decree quieting title to Mr. James' wages, injunctive relief, damages, and a return of the wages which had already been seized. After a hearing on plaintiffs' request for a temporary restraining order, the district court found that plaintiffs had not shown that the IRS had used improper or deficient notification and assessment procedures and had not shown that plaintiffs would be successful in their claim for injunctive relief. The United States moved for dismissal and, in the alternative, for summary judgment, and plaintiffs responded with a cross motion for summary judgment. At that point, the district court entered its final order, James v. United States, No. C90-0052J, Order on Motion for Summary Judgment, 1991 WL 172929 (D.Wyo. June 21, 1991), I R. tab 33, holding that plaintiffs' action was in reality a suit questioning the propriety of the assessment itself rather than the procedures used to collect the assessment and, consequently, that the court lacked jurisdiction. 2 The court also found that it lacked jurisdiction to grant the injunctive relief plaintiffs requested. Plaintiffs brought this appeal. 3 We will

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first examine plaintiffs' quiet title action, with its attendant claims for damages and return of previously seized wages. We will then examine plaintiffs' request for injunctive relief.

I

This is a lawsuit against the United States. The United States may not be sued unless it waives its immunity from suit. United States v. Dalm, 494 U.S. 596, 608, 110 S.Ct. 1361, 1368, 108 L.Ed.2d 548 (1990). The terms of the consent define the court's jurisdiction. Id. Waivers of sovereign immunity are to be read narrowly. Engel v. United States (Estate of Johnson), 836 F.2d 940, 943 (5th Cir.1988); see also Schmidt v. King, 913 F.2d 837, 839 (10th Cir.1990). The party bringing suit against the United States bears the burden of proving that sovereign immunity has been waived. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 188, 56 S.Ct. 780, 784-85, 80 L.Ed. 1135 (1936).

Thus, our first task is to determine whether the district court had subject matter jurisdiction to entertain plaintiffs' quiet title action. "The existence of subject matter jurisdiction is a question of law reviewed de novo. The district court's factual findings on jurisdictional issues must be accepted unless clearly erroneous." Hughes v. United States, 953 F.2d 531, 535 (9th Cir.1992) (citation omitted).

A

Plaintiffs cite 28 U.S.C. § 2410 as the statute that provides a waiver of sovereign immunity for their quiet title action. 4 This consent to suit is available for taxpayers challenging procedural irregularities in the establishment of a lien, Guthrie v. United States, 970 F.2d 733, 735 (10th Cir.1992), as well as third parties challenging a lien's efficacy, see Aqua Bar & Lounge, Inc. v. United States, 539 F.2d 935, 938 (3d Cir.1976). However, § 2410 does not waive sovereign immunity for claims that the taxpayer does not owe the taxes in question. See, e.g., Guthrie, 970 F.2d at 735. 5

Plaintiffs' underlying theory appears to be that when Mr. James did not file tax returns in 1981 and 1984, the IRS used a procedure of preparing and filing a return "on behalf of" Mr. James which was, according to plaintiffs, deficient because it was not authorized by statute or regulation. See, e.g., I Supp. R. tr. of temporary restraining order hearing (TRO hearing), at 18 (Mrs. James stated: "[Mr. James'] contention is the procedural defects go as far back of the filing of any kind of a return for him, if he was not required to file one."); I R. tab 1, p 8 ("Any form filed on behalf of the Plaintiff was procedurally improper."). They couch this argument in terms of notice and assessment requirements, using a domino form of logic: if the initial deficiency was arrived at incorrectly, then the various procedures that the IRS used to notify Mr. James of the deficiency and to collect the deficiency were, by plaintiffs' definition, invalid. For example, when Mr. James requested the "pertinent parts" of the assessment, by plaintiffs' definition the IRS could not satisfy the request, because plaintiffs denied that a "valid" deficiency ever existed under the tax laws and regulations. 6

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Plaintiffs' various theories and requests for relief appear to flow from this basic, underlying quarrel with the IRS procedure for collecting taxes in cases in which the taxpayer does not file a return. 7 Accordingly, the bulk of plaintiffs' action is based on the merits of Mr. James' underlying tax liability, not the procedure used to notify him of the deficiency or the procedure used to collect it. 8

To the extent that plaintiffs challenged the merits of Mr. James' underlying requirement to pay taxes for...

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