Capital Tracing, Inc. v. U.S.
| Decision Date | 17 August 1995 |
| Docket Number | No. 92-55885,92-55885 |
| Citation | 63 F.3d 859 |
| Parties | -5993, 95-2 USTC P 50,473, 95 Cal. Daily Op. Serv. 6483, 95 Daily Journal D.A.R. 11,093 CAPITAL TRACING, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Arnold I. Weber, San Francisco, CA, for plaintiff-appellant.
Kevin M. Brown, Tax Div., Dept. of Justice, Washington, DC, for defendant-appellee.
Appeal from the United States District Court for the Central District of California.
Before: NELSON, REINHARDT, and BRUNETTI, Circuit Judges.
On January 6, 1992, Plaintiff/Appellant Capital Tracing, Inc. ("Capital") filed a wrongful levy action against the United States under 26 U.S.C. Sec. 7426 1 based on the Internal Revenue Service's ("IRS") notice of levy filed on August 22, 1985. The district court dismissed the action on May 8, 1992, for lack of subject matter jurisdiction, finding that the time for filing a wrongful levy action under Sec. 7426 had expired on May 22, 1986, nine months after the IRS served its notice of levy. Capital appealed the district court's decision.
Capital contends that the district court erroneously granted the government's motion to dismiss, arguing that the limitations period did not commence until we issued our 1991 ruling in United States v. Badger, 930 F.2d 754 (9th Cir.1991) (Badger II ). It is unnecessary for us to decide the disputed issue of when the limitations period began to run, as determined by the "date of the levy" on the cash bond. We assume, without deciding, that the IRS' notice of levy served upon the clerk of the district court on August 22, 1985, triggered the limitations period. As a result, Capital's wrongful levy action, filed on January 6, 1992, after the expiration of the limitations period, was untimely. However, we find that equitable factors tolled the limitations period from the date of the notice of levy until we decided Badger II on April 16, 1991. Because Capital filed its wrongful levy action within nine months of our 1991 decision in Badger II, this action is not time-barred. We therefore reverse and remand.
On or before July 13, 1982, the IRS assessed $180,582.48 in income taxes against John James Badger ("Badger"). Badger was indicted on six fraud-related offenses in July 1985 and was ordered to post a $100,000 cash bond. Capital alleges that on July 29, 1985, it posted the bond with approximately $73,000 of its own funds and approximately $27,000 loaned to Badger by other people or entities for the purpose of posting bond.
On August 22, 1985, the IRS served a notice of levy upon the Clerk of the District Court for the Central District of California. The notice of levy stated that "[t]he intent and purpose of this levy is to attach to the $100,000 cash bond" posted for Badger.
Badger was found guilty, and we affirmed his conviction in United States v. Badger, 849 F.2d 1476, 1988 WL 63746 (9th Cir.) (Badger I ), cert. denied, 488 U.S. 891, 109 S.Ct. 225, 102 L.Ed.2d 215 (1988). Badger surrendered himself for incarceration, and thereafter the district court ordered that the cash bond be exonerated. Upon being apprised of the IRS' notice of levy, the district court ordered the IRS to show cause why the $100,000 cash bond should not be exonerated and paid over to Capital. The district court held a hearing on the show cause order and, on May 11, 1989, ordered that the $100,000 be paid over to Capital on May 18, 1989. The district court held that Internal Revenue Code ("I.R.C.") Sec. 6331 does not allow the IRS to levy upon bail bonds.
On April 16, 1991, we reversed the district court order and remanded for the district court to comply with the IRS' notice of levy. Badger II, 930 F.2d 754, 755. We stated that:
I.R.C. Sec. 6331 provides for a lien on "all property and rights to property" belonging to the delinquent taxpayer. There is no exception for bail bonds. Moreover, there is no requirement that the IRS prove that any portion of property being levied upon belongs to the delinquent taxpayer before it can levy on the property. Under I.R.C. Sec. 7421(a), the Anti-Injunction Act [footnote omitted], if any person wishes to contest the levy, that person must bring a wrongful levy action under I.R.C. Sec. 7426 or other provisions specified in the Anti-Injunction Act. These I.R.C. sections indicate that the district court was required to honor the IRS's levy without inquiring into its validity or determining how much of the bail bond belongs to Badger.
On June 25, 1991, the district court on remand directed payment of the $100,000 to the IRS; payment was made on June 27, 1991. On January 6, 1992, Capital filed a complaint in the district court under Sec. 7426 alleging that the IRS had "wrongfully levied on the [bail bond]." 2
On March 11, 1992, the government moved to dismiss Capital's complaint for lack of subject matter jurisdiction. Specifically, the government contended that Capital's wrongful levy action was untimely under Sec. 6532(c), because it was not brought within nine months after the IRS' August 22, 1985, service of notice of levy on the bail bond. As a result, the government argued that the district court lacked subject matter jurisdiction over the case.
Following a hearing, the district court entered an order on May 8, 1992, dismissing Capital's complaint for lack of subject matter jurisdiction. The district court denied Capital's motion for reconsideration and vacation of its May 8, 1992 order. Capital filed a timely appeal from the district court's order.
The district court's order dismissing Capital's complaint on the ground that statutory limitations bar the action involves questions of law which we review de novo. Washington v. Garrett, 10 F.3d 1421, 1429 (9th Cir.1993).
The United States, as a sovereign, may be sued only with its consent, United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953-54, 47 L.Ed.2d 114 (1976), and waivers of sovereign immunity are to be strictly construed. United States v. Michel, 282 U.S. 656, 660, 51 S.Ct. 284, 285-86, 75 L.Ed. 598 (1931); Dieckmann v. United States, 550 F.2d 622, 624 (10th Cir.1977). However, once the government has waived its sovereign immunity, the doctrine of equitable tolling may apply to toll the statutory limitation. Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95-96, 111 S.Ct. 453, 457-58, 112 L.Ed.2d 435 (1990). 3
We assume, without deciding, that the IRS' service of the notice of levy on the clerk of the district court on August 22, 1985, triggered the limitations period which, unless equitably tolled, would have required Capital to bring its wrongful levy action on or before May 22, 1986, to avoid summary judgment.
In Williams-Scaife v. Department of Defense Dependent Sch., 925 F.2d 346, 347 (9th Cir.1991), we applied the Supreme Court's decision in Irwin and stated that "equitable tolling is applicable in employment discrimination cases filed by federal employees [against the government.]" The Irwin decision overruled a long line of Ninth Circuit cases 4 which refused to apply equitable tolling in cases against the government. In Irwin, the Court held that "the same rebuttable presumption of equitable tolling applicable to suits against private defendants should also apply to suits against the United States." 498 U.S. at 95-96, 111 S.Ct. at 457. The Court noted that federal courts have allowed equitable tolling in situations where the claimant diligently sought judicial relief by filing a defective pleading during the statutory period or where the complainant had been induced by his adversary to allow the filing deadline to pass. Id. at 96, 111 S.Ct. at 457-58.
There are other situations in which the courts have indicated that it may be proper for courts to exercise their equitable powers. In Catawba Indian Tribe of South Carolina v. United States, 982 F.2d 1564 (Fed.Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 2995, 125 L.Ed.2d 689 (1993), the court stated that even where there is no applicable express tolling provision, Id. at 1571 & n. 10.
In Dempsey v. Pacific Bell Co., 789 F.2d 1451 (9th Cir.1986), in determining whether statutory limitations may be equitably tolled, we directed the district court to consider such factors as the lack of clear precedent in the circuit regarding the issue, and the absence of prejudice to the defendant. Id. at 1453 (); see also Vance v. Whirlpool Corp., 707 F.2d 483, 489-90 (4th Cir.1983) (), supp. op., 716 F.2d 1010 (4th Cir.1983), cert. denied, 465 U.S. 1102, 104 S.Ct. 1600, 80 L.Ed.2d 130 & 467 U.S. 1226, 104 S.Ct. 2678, 81 L.Ed.2d 873 (1984). Because of Irwin, we can now apply the Dempsey factors in cases against the government.
The history of the instant case illustrates the lack of clarity in the law that would justify a court's equitable tolling of a limitations period. At the exoneration proceeding in 1989, the district court ruled against the IRS and ordered that the bond proceeds be paid over to Capital. In 1991, we overturned that decision and remanded for the district court to comply with the IRS' notice of levy. We said that ...
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