Amwest Sur. Ins. Co. v. U.S.

• Decision Date: 01 July 1994
• Docket Number: No. 93-2915,93-2915
• Citation: 28 F.3d 690
• Parties: -5220, 94-2 USTC P 50,376 AMWEST SURETY INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 690

28 F.3d 690

74 A.F.T.R.2d 94-5220, 94-2 USTC P 50,376

AMWEST SURETY INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 93-2915.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 11, 1994.

Decided July 1, 1994.

H. Andrew Sonneborn (argued), Linder & Hollowell, Indianapolis, IN, Stanley Haren, Bush & Berger, Woodland Hills, CA, for plaintiff-appellant.

John J. Thar, Asst. U.S. Atty., Office of the U.S. Atty., Indianapolis, IN, Gary R. Allen, William S. Estabrook, Randolph L. Hutter (argued), Steven E. Cole, Department of Justice, Tax Div., Appellate Section, Washington, DC, for defendant-appellee.

Before CUMMINGS, CUDAHY, and MANION, Circuit Judges.

MANION, Circuit Judge.

The plaintiff, Amwest Surety Insurance Company ("Amwest"), filed an action against the United States for wrongful tax levy pursuant to 26 U.S.C. Sec. 7426(a)(1). The district court dismissed Amwest's complaint for lack of subject matter jurisdiction because Amwest had failed to bring its action within nine months from the date of the levy as required by 26 U.S.C. Sec. 6532(c)(1). The district court also rejected Amwest's contention that certain letters it had sent to the revenue officer involved in this case constituted written requests for the return of property described in 26 U.S.C. Sec. 6343(b), which would extend the limitations period an additional twelve months pursuant to 26 U.S.C. Sec. 6532(c)(2). We affirm the district court.

I.

The facts as alleged in Amwest's complaint demonstrate that Amwest, an insurance and surety company incorporated in California entered into an agency agreement with the taxpayer, Ms. Arvina Joyce Carlson, according to which Ms. Carlson would serve as Amwest's agent in Indiana for the purpose of issuing bail bonds. Pursuant to the agreement, Ms. Carlson set up a collateral trust fund account (the "indemnity fund") in her name at Peoples Bank in Indianapolis, Indiana. Ms. Carlson would fund the trust by depositing into the account a certain percentage (.0005%) of the face value of each bail bond issued by Amwest. The funds would be used to indemnify Amwest in the event of any losses or expenses resulting from the bail bonds written by Ms. Carlson. The agreement provided that the indemnity fund was subject to the sole control of Amwest.

Meanwhile, Ms. Carlson had been accruing a sizeable personal income tax liability with the IRS. Eventually, the IRS assessed Ms. Carlson for $330,167.04 in back taxes, covering the tax years of 1986 through 1989. In its efforts to collect the money owed, the IRS got wind of Ms. Carlson's account at Peoples Bank. On November 19, 1991, the IRS served Peoples Bank with notice of levy and seizure regarding the funds deposited at People's Bank in Ms. Carlson's name. In December of 1991, Peoples Bank, without notifying Amwest, complied with the IRS notice and remitted the funds (which amounted to $56,453.08) to the IRS.

When Amwest discovered that the IRS had seized the indemnity funds, it took steps to recover them. Amwest, through its in-house counsel, first secured a copy of the notice of levy that was sent to Peoples Bank. The "Notice of Levy," IRS Form 668-A, stated that "[i]f you have any questions about this levy, please call or write us." The only address given on the notice of levy under the heading "reply" was that of the Greenwood, Indiana office of the IRS, attention Wayne Stanton (the revenue officer in charge of the case). The notice also had attached to it an additional page entitled "Excerpts from the Internal Revenue Code." At the bottom of this page there is a heading entitled "Applicable Sections of the Internal Revenue Code." One of the sections listed is Sec. 7426, "Civil Actions By Persons Other Than Taxpayers." Turning to that section one gets to subsection (h) which provides: "Cross reference.--For period of limitations, see section 6532(c)." 26 U.S.C. Sec. 7426(h). Section 6532(c) tells you that wrongful levy actions must be filed within nine months of the levy unless that period is extended by a timely submission of a request for the return of property described in 26 U.S.C. Sec. 6343(b). But Sec. 6343(b) sheds no light on the requirements for a request; it simply describes the types of property that may be returned. In other words, looking at the statutory provisions alone, one is left to guess just what constitutes a request for the return of wrongfully seized property. Indeed, it is only by going to the regulations under Sec. 6532(c)(2) that one finally gets a hint at what constitutes such a request. 26 C.F.R. Sec. 301.6532-3(b)(1) states that "[t]he 9 month period prescribed in section 6532(c)(1) ... shall be extended to the shorter of, ... 12 months from the date of filing by a third party of a written request under Sec. 301.6343-1(b)(2) for the return of property wrongfully levied upon...." 26 C.F.R. Sec. 301.6532-3(b)(1) (emphasis added). Coming to Sec. 301.6343-1(b)(2), one at last discovers that requests for the return of property described in Sec. 6343(b) are those which, besides containing certain specific information regarding the sought-after property, are written requests, "addressed to the district director (marked for the attention of the chief, special procedures staff) for the internal revenue district in which the levy was made." 26 C.F.R. Sec. 301-6343-1(b)(2). But unfortunately for Amwest (as we shall soon see), there is no reference to these regulations in the notice sent by the IRS and received by Amwest.

So, on June 23, 1992, Amwest's attorney did what seemed the most logical thing to do given the information actually contained in the IRS's notice of levy: he wrote to Agent Stanton at the Greenwood office, informing him of Amwest's ownership interest and demanding return of the funds. In his letter, counsel explained that the seized funds comprised an indemnity fund set up pursuant to Amwest's agency agreement with Ms. Carlson. Counsel also included in his letter a copy of the agency agreement between Amwest and Ms. Carlson. In conclusion, the letter stated that if Agent Stanton did not respond in two weeks, Amwest would file an action in federal court to recover its funds.

From the record before us, it appears that Agent Stanton did respond with a phone call on July 9, 1992. We say this because counsel for Amwest sent a second letter to Agent Stanton, dated July 10, 1992, in which counsel acknowledges a telephone conversation with Agent Stanton on July 9, 1992. Judging by Amwest's second letter, it appears that Agent Stanton had some questions regarding a $90,000 withdrawal from the indemnity fund shortly before the IRS levied the funds (perhaps Agent Stanton suspected that Ms. Carlson, knowing that the IRS was after her, was squirreling away funds). In his letter, counsel explained that Amwest made this withdrawal to reimburse it for losses it had incurred under the bonds issued by Ms. Carlson, and that this withdrawal was specifically authorized by the agency agreement between Amwest and Ms. Carlson. The letter further indicates that counsel was sending another copy of the agency agreement to Agent Stanton (he claimed he had not received it yet, even though it had been two and a half weeks since Amwest sent the first one). This second letter concluded by reminding Agent Stanton of Amwest's first letter of June 23, 1992, and again requested him to respond to Amwest's initial demand for the seized funds. The copy of this second letter in the record also includes a receipt for certified mail, which the Government does not dispute was signed by Agent Stanton. In fact, the Government does not dispute that Agent Stanton received both of Amwest's letters. Besides the telephone call and the two letters, the record contains no indication of any further contact between Amwest and Agent Stanton before the commencement of this case.

On November 12, 1992, Amwest filed its complaint in the district court against the United States for wrongful levy pursuant to 26 U.S.C. Sec. 7426. ¹ The government filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1), arguing that the district court lacked subject matter jurisdiction over the complaint since Amwest had not filed its complaint within nine months of the levy as required by Sec. 6532(c). Amwest later amended its complaint to allege that the correspondences with Agent Stanton regarding Amwest's ownership interest in the levied funds extended the period in which to file its claim. Amwest attached to its amended complaint copies of the two letters it had sent to Agent Stanton. Amwest argued that its letters to Agent Stanton constituted requests for the return of the levied property which, according to Sec. 6532(c)(2), served to extend the nine-month period of limitations to twelve months from the date Amwest mailed its requests. In the alternative, Amwest argued that because it never received notice from Agent Stanton or the IRS that its letters did not strictly comply with the requirements of a written request under the regulations, its letters were deemed adequate pursuant to Sec. 301.6343-1(b)(3) and, as such, served to extend the limitations period.

In response, the government argued that Amwest's letters were not in compliance with all of the regulatory provisions, specifically, 26 C.F.R. Sec. 301.6343-1(b)(2), which required that a request for the return of property be addressed to the district director for the internal revenue district in which the levy was made, marked for the attention of the chief, special procedures staff. Consequently, Amwest's letters did not comply with the requirements of a "written request" within the meaning of the regulations for purposes of extending the nine-month limitations period. With respect to Amwest's alternate contention under Sec. 301.6343-1(b)(3), the government maintained that the provisions of (b)(3) only apply to written requests that lack certain information and are thus...