Egbert v. US

• Decision Date: 02 December 1990
• Docket Number: C90-0084J.,No. C89-0219J,C89-0219J
• Citation: 752 F. Supp. 1010
• Parties: Howard EGBERT, Plaintiff, v. UNITED STATES of America, Defendant. and UNITED STATES of America, Plaintiff, v. Howard EGBERT, Defendant.
• Court: U.S. District Court — District of Wyoming

752 F. Supp. 1010

Howard EGBERT, Plaintiff, v. UNITED STATES of America, Defendant. and UNITED STATES of America, Plaintiff, v. Howard EGBERT, Defendant.

Nos. C89-0219J, C90-0084J.

United States District Court, D. Wyoming.

December 2, 1990.

COPYRIGHT MATERIAL OMITTED

Richard Mathey, Green River, Wyo., for plaintiff.

Philip Blondin, Washington, D.C., Richard Stacy, Cheyenne, Wyo., for U.S.

Howard Egbert, Rock Springs, Wyo., pro se.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

ALAN B. JOHNSON, District Judge.

The above captioned matters came before the Court for hearing on pending dispositive motions on June 11, 1990 and September 26, 1990. The cases have been consolidated to decide the motions for summary judgment made by the United States in C89-0219 and C90-0084 and a cross motion for summary judgment made by Howard Egbert in C90-0084. The court, having considered the materials on file both in support of and in opposition to the motions, having considered the arguments of the parties, and being fully advised in the premises, FINDS and ORDERS as follows:

BACKGROUND

These cases arise from Howard P. Egbert's failure to file federal income tax returns for the 1978 through 1983 tax years, resulting in a determination of tax deficiencies against him by the Internal Revenue Service. The Government contends that they properly assessed Egbert for his tax deficiencies, properly notified him and demanded payment but that he failed to voluntarily pay the tax. In an effort to collect the tax administratively, the Government filed Notices of Federal Tax Lien with the Sweetwater County, Wyoming, Clerk naming Egbert as taxpayer and served Notice of Levy on Egbert's employer, attaching Egbert's wages. Additionally, the Government levied on Egbert's bank account and seized and sold his pickup truck. The Government then proceeded civilly against Mr. Egbert by filing a complaint in this court seeking to reduce Mr. Egbert's tax liability to judgment. Egbert countered by filing a complaint on August 3, 1989, contending that the levies and liens placed on his property and wages were unlawful and constitute a deprivation of liberty and property without due process. The claim is premised upon allegations that the Government failed to properly assess his tax liability, failed to notify him of any assessment and failed to demand payment before recording liens and seizing his property. Egbert seeks a decree quieting title to the property seized from him, the return of the truck sale proceeds, damages for unlawful disclosure of tax return information, an order removing liens and levies, an injunction preventing further unauthorized disclosures and summary judgment in the collection suit.

JURISDICTION

Howard Egbert asks this court to review the propriety of government action resulting in liens and levies on his property in connection with the procedural requirements of 26 U.S.C. §§ 6201, 6203, 6303(a), 6213(a), and 6331. Egbert asks the court, without first requiring him to pay the tax, to quiet title to property and money already seized by the United States; quiet title to property Egbert presently owns; and to award damages caused by the Government's wrongful disclosure of confidential tax return information. The threshold issue is whether the district court has subject matter jurisdiction to consider Mr. Egbert's claims. In taking on this task the Court must untangle the network of assessment, notice, demand, lien, levy and other tax statutes that two federal courts have characterized as "unworkable" and "so complicated that even the IRS admits it cannot completely understand it." Rodriquez v. United States, 629 F.Supp. 333, 336 (N.D.Ill.1986) quoting White v. Commissioner of Internal Revenue, 537 F.Supp. 679, 689 (D.Colo.1982).

28 U.S.C. § 2410

It is firmly established that the United States, as sovereign, "is immune from suit save as it consents to be sued ... and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit." United States v. Sherwood, 312 U.S. 584, 587-588, 61 S.Ct. 767, 770, 85 L.Ed. 1058 (1941). Any lawsuit brought against the United States which is (1) not provided for by statute, or (2) does not comply with the statutory requirements must be dismissed because it is jurisdictionally defective. See, United States v. Testan, 424 U.S. 392, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976); Land v. Dollar, 330 U.S. 731, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947). Egbert first relies upon 28 U.S.C. § 2410(a) to provide a waiver of immunity giving this court a jurisdictional basis to consider the factual issues he presents. Section 2410(a) reads:

Under the conditions prescribed in this section and section 1444 of this title for the protection of the United States, 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—

(1) to quiet title to,

(2) to foreclose a mortgage or other lien upon,

(3) to partition

(4) to condemn, or

(5) of interpleader or in the nature of interpleader with respect to,

real or personal property on which the United States has or claims a mortgage or other lien. 28 U.S.C. § 2410(a).

It is a well established principle that a person who wishes to challenge his federal tax assessment in district court must remit his tax before seeking review, or in other words "pay first and litigate later." Flora v. United States, 362 U.S. 145, 164, 80 S.Ct. 630, 641, 4 L.Ed.2d 623 (1960). If, however, a taxpayer seeks to quiet title to property upon which the United States has a lien, he may bring a quiet title action in district court under section 2410(a), without paying the tax, and sovereign immunity will be waived to allow the court to determine whether the procedures used to enforce the lien were proper. Aqua Bar & Lounge, Inc. v. United States, 539 F.2d 935 (3rd Cir.1976). Section 2410(a) does not broadly grant jurisdiction to any taxpayer seeking to quiet title, but merely provides a limited waiver of immunity in that it does not permit a collateral attack on the merits of the tax assessment that gave rise to the lien. Pollack v. United States, 819 F.2d 144 (6th Cir.1987). A court will not automatically assume jurisdiction over a taxpayer's challenge to the validity of an assessment merely because the taxpayer characterizes the action as a suit to quiet title. Id. at 145; Laino v. United States, 633 F.2d 626, 633 n. 8 (2d Cir.1980). In a case which discusses the purpose of section 2410(a), Judge Friendly notes that congress did not intend to permit all taxpayers owning property, real or personal, to use § 2410 where the only question was whether the Commissioner had erred, in fact or in law, in making the underlying assessment. Falik v. United States, 343 F.2d 38, 42 (2d Cir.1965).

It is thus apparent that a district court's consideration of a taxpayer's quiet title complaint demands a preliminary analysis of the taxpayer's reason for objecting to the government lien. If the court finds that tax assessments are not the basis for the wrongful lien, § 2410 will lift the immunity bar and provide the district court jurisdiction to consider the taxpayers argument. However, when the court determines that allegations of wrongful tax assessment provide the underpinnings for the taxpayer's lien challenge, § 2410 no longer offers jurisdictional support for the court to go further.

26 U.S.C. 6303

The factual allegation upon which all of Egbert's claims are based is that procedurally flawed tax assessments and notice requirements resulted in wrongful government liens and levies, wrongful disclosures and the wrongful sale of his property. Howard Egbert complaint, paragraph 15. Egbert further contends that he is not contesting his tax liability, rather he is only challenging the Government's alleged failure to properly serve him with a Notice of Assessment and Demand for Payment as required by 26 U.S.C. § 6303(a). Section 6303(a) reads:

Where it is not otherwise provided by this title, the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address.

Section 6321, which creates a lien on the property of a taxpayer who fails to pay taxes, states:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto), shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. (emphasis added).

The government must satisfy § 6303(a) notice requirements and properly demand payment as a condition precedent to the creation of a valid tax lien. United States v. Guon, 442 F.2d 1021 (9th Cir. 1971), cert. denied, 404 U.S. 863, 92 S.Ct. 92, 30 L.Ed.2d 107.

Since the basis for Egbert's objection to the lien is the factual question of adequacy of the § 6303 notice and demand for payment, the Court must next determine whether the § 6303 requirement is a matter of tax lien enforcement procedure or a challenge to tax assessment procedure. At least one court decided a case differing factually from the instant case and permitted a § 2410(a) suit to challenge the validity of notice and demand procedures used in imposing a § 6321 federal tax lien. United States v. Coson, 286 F.2d 453 (9th Cir. 1961). In Coson, the district court assumed jurisdiction and considered taxpayer allegations that without proper notice, the government levied against the wrong taxpayer and the wrong property due to confusion over the existence of a partnership....