Calmes v. US

• Decision Date: 21 May 1996
• Docket Number: Civil A. No. 3:92-CV-2263-X.
• Parties: Susie J. CALMES, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Northern District of Texas

926 F. Supp. 582

Susie J. CALMES, Plaintiff, v. UNITED STATES of America, Defendant.

Civil A. No. 3:92-CV-2263-X.

United States District Court, N.D. Texas, Dallas Division.

May 21, 1996.

COPYRIGHT MATERIAL OMITTED

Tim Wheat, Dallas, Texas, for plaintiff.

Chip Shilling, IRS, Dallas, Texas, for defendant.

MEMORANDUM OPINION AND ORDER

KENDALL, District Judge.

This case is before the Court on several issues of law, there being no factual disputes between the parties. Having considered the briefing, the arguments of counsel and the applicable law, the Court determines that Plaintiff's declaratory judgment action must be DISMISSED with PREJUDICE. Plaintiff's motion for a permanent injunction against the United States' wrongful levy will be GRANTED.

Background

This is a tax suit arising from the United States' efforts to levy against plaintiff's husband's alleged community property interest in plaintiff's employment income. Jack Norton Calmes allegedly owes the United States $210,260.19 for tax deficiencies for the years 1984 through 1989.

On September 6, 1989, Plaintiff married Mr. Calmes. Just prior to the wedding ceremony, the couple executed a premarital agreement providing that their respective property would remain separate property after the marriage. The agreement also provided that employment income earned by either Mr. or Mrs. Calmes during their marriage would remain separate property. Specifically, the prenuptial agreement stated:

All personal service income earned by either Jack Calmes or Susan Bagwell during marriage shall be the separate property of Jack Calmes or Susan Bagwell, and all proceeds of, income earned from, and proceeds of, income earned from, and properties purchased with such separate income shall be the separate property of Jack Calmes or Susan Bagwell.

On October 14, 1992, the Internal Revenue Service served a notice of levy on Plaintiff's employer. The notice stated in pertinent part as follows:

By virtue of taxes assessed against Jack N. Calmes, it is intended that this levy will cover and attach to any funds due and owing to Susie J. Calmes, such funds being the community property of Jack N. Calmes and Susie J. Calmes. This levy attaches to Mr. Calmes' community property (50% of Mrs. Calmes' income).

The IRS agrees that Plaintiff does not owe them a penny; rather, it is her husband's debt, yet they seek to levy his alleged interest in her income.

I. Declaratory Judgment Action

Plaintiff filed suit seeking an injunction and a declaratory judgment that the IRS is not entitled to levy against Plaintiff's personal income to satisfy the alleged deficiency owed by her husband. Specifically, her suit is one for wrongful levy arising under 26 U.S.C. § 7426 and for a declaratory judgment under 28 U.S.C. § 2201.

Plaintiff's action for declaratory judgment is immediately problematic. The operative statute states, in pertinent part, as follows:

In a case of actual controversy within its jurisdiction, except with respect to Federal taxes other than actions brought under section 7428 of the Internal Revenue Code of 1986 ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration....

28 U.S.C. § 2201(a). This case is clearly one "with respect to Federal taxes," and section 7428 addresses declaratory judgments concerning classification of tax-exempt organizations under 26 U.S.C. § 501(c)(3), an issue not present in the instant action. The Court wonders why anyone would bring a declaratory judgment action on facts such as those involved here. The question on this portion of plaintiff's suit becomes, not whether the declaratory judgment action is going away, but rather how it is going away.

Defendant complains that the Court does not have subject matter jurisdiction to entertain it, an assertion implicating Rule 12(b)(1), FED.R.CIV.P. The statute's language, though, suggests that the problem is not jurisdictional, but instead should be properly addressed under Rule 12(b)(6), FED.R.CIV.P., which involves a failure to state a claim upon which relief can be granted. The phrase "in a case of actual controversy within its jurisdiction" in section 2201 suggests that that statute does not itself confer jurisdiction; indeed, it presupposes that a court's jurisdiction exists. One court faced with the same issue determined that one bringing a declaratory judgment action regarding a federal tax matter failed to state a claim on which relief could be granted. Wells v. United States, 746 F.Supp. 1024, 1028 (D.Hawaii 1990). However, language in a Fifth Circuit opinion might support the proposition that the matter is jurisdictional, see McCarty v. United States, 929 F.2d 1085, 1088 (5th Cir.1991) (dictum), and one court has interpreted that language so. Smith v. Internal Revenue Service, No. 90-4818, 1991 WL 236657 at *1 (E.D.La. Oct. 29, 1991). The better reasoning appears to lie with the Wells court's analysis, coupled with the statute's plain meaning, however the issue appears to be metaphysical because regardless of the answer, plaintiff's declaratory judgment action must be dismissed.

II. Wrongful Levy Claim

The crux of this case contains a much different issue, one which the parties assert is of first impression, and it concerns the relation of Mr. and Mrs. Calmes' prenuptial agreement to Mr. Calmes' tax debt. Defendant presents two arguments in its effort to wrest Mrs. Calmes' employment income from her in payment of Mr. Calmes' premarital tax debt.

Initially, the United States asserts that the prenuptial agreement which the parties executed was ineffective in its attempt to characterize each party's personal service income as separate property. The Government's argument rests upon a strained interpretation of the phrase "shall be." As discussed further in this opinion, the United States' game of semantics is meritless under current Texas law.

Alternatively, the defendant asserts that even if the prenuptial agreement effectively characterized the Calmes' future personal service income as separate property, the characterization is void as to the United States, as it was entered into in an effort to hinder, delay or defraud the defendant, a preexisting creditor.¹ In support of this argument, the United States relies upon the Texas Uniform Fraudulent Transfers Act (TUFTA) drawing an analogy between TUFTA's provisions and Article XVI's lack of intent to defraud requirement. Applying this analogy, the defendant attempts to show the Court seven so-called "badges of fraud" that brand the Calmes' prenuptial agreement as fraudulent. For the reasons discussed below, the United States' contention that the prenuptial agreement was a fraudulent transfer is also wholly without merit.

A. Did the Prenuptial Agreement Effectively Characterize Each Party's Personal Service Income as Separate Property?

Texas, due to its Mexican and Spanish law heritage, is a community property state. While the basic features of this system endure, over the years the details of Texas marital property law have been altered by constitutional amendments, legislative enactments and judicial decisions. See THOMAS M. FEATHERSTON, JR. and JULIE A. SPRINGER, Marital Property Law in Texas: The Past, Present and Future, 39 BAYLOR L.REV. 861, 862 (1987). In the past, neither married persons nor persons about to marry could by "mere agreement" convert the character of income or community property into separate property. Winger v. Pianka, 831 S.W.2d 853 (Tex.App. — Austin 1992, writ denied) (citations omitted). Subsequently, amendments to the Texas Constitution allowed spouses to partition then existing community property. TEXAS CONSTITUTION, art. XVI, § 15 (1948, amended 1980). Spouses are also allowed to agree that all or part of their community property becomes the property of the surviving spouse. TEXAS CONSTITUTION, art. XVI, § 15 (1987). Most importantly, the Texas Constitution has been amended to allow spouses and persons about to marry to partition or to exchange their interests in property then existing or to be acquired in the future. TEXAS CONSTITUTION, art. XVI, § 15 (1980, amended 1987). Article XVI provides, in pertinent part:

Provided that persons about to marry and spouses, without the intention to defraud pre-existing creditors, may by written instrument from time to time partition between themselves all or part of their property, then existing or to be acquired, or exchange between themselves the community interest of one spouse or future spouse in any property for the community interest of the other spouse or future spouse in other community property then existing or to be acquired, whereupon the portion or interest set aside to each spouse shall be and constitute a part of the separate property and estate of such spouse or future spouse; spouses also may from time to time, by written instrument, agree between themselves that the income or property from all or part of the separate property then owned or which thereafter might be acquired by only one of them, shall be the separate property of that spouse.... Id.

Initially, some question remained as to whether the definition of "property to be acquired" effectively encompassed future personal earnings thereby making this type of personalty susceptible to premarital partition or exchange. However, recent judicial decisions and sections of the Texas Family Code² have made the fact that personal earnings are subject to partition or exchange abundantly clear.

In Winger v. Pianka, the Austin Court of Appeals was presented with the issue of whether the amendment to Article 16, § 15 allowed persons contemplating marriage to partition future earnings. 831 S.W.2d 853 (Tex.App. — Austin 1992, writ denied). In that opinion, after a thorough analysis of the amendment's text, the voters' intent and discussions concerning the amendment by the Texas Supreme Court, the Austin court held that the 1980 ...