Ferrel v. Brown

• Decision Date: 19 October 1993
• Docket Number: No. C93-604R.,C93-604R.
• Citation: 847 F. Supp. 1524
• Parties: DeVona FERREL, Plaintiff, v. Ann BROWN, Seattle District Director of Internal Revenue: Timothy A. Towns, Chief, Collection Branch: and The United States of America, Defendants.
• Court: U.S. District Court — Western District of Washington

847 F. Supp. 1524

DeVona FERREL, Plaintiff, v.Ann BROWN, SeattleDistrict Director of Internal Revenue: Timothy A. Towns, Chief, Collection Branch: and The United States of America, Defendants.

No. C93-604R.

United States District Court, W.D. Washington, at Seattle.

October 19, 1993.

Robert E. Kovacevich, Spokane, WA, for plaintiff.

Diane E. Tebelius, U.S. Atty's Office, Seattle, WA, W. Carl Hankla, U.S. Dept. of Justice, Tax Div., Washington, DC, for defendants.

ORDER DISMISSING PLAINTIFF'S CLAIMS

ROTHSTEIN, Chief Judge.

THIS MATTER comes before the court on defendants' motion to dismiss or in the alternative for summary judgment.After reviewing the motion, together with all materials filed in support and in opposition, the court finds and rules as follows:

I.BACKGROUND

PlaintiffDeVona Ferrel is the sole owner of bank account C/A 12022372 at the Cashmere Valley Bank ("Bank"), Cashmere, Washington.On January 9, 1993, the Internal Revenue Service sent a notice of levy to the Bank.The notice was signed by defendantTimothy A. Towns, Chief, Collection Division.The notice named Charles M. Ferrel, Jr., plaintiff's husband, as the subject of the levy and listed his social security number.The notice did not list Ms. Ferrel's name, but did list her social security number.The notice directed the Bank to place a 21-day hold on Mr. Ferrel's accounts to satisfy a tax penalty assessed under 26 U.S.C. § 6672.The parties do not dispute that the plaintiff is not responsible for the tax penalty.

Upon receipt of the notice of levy, the Bank placed a 21-day hold on Ms. Ferrel's account.Mr. Ferrel had no interest in the account and was not a signatory.On February 2, 1993, plaintiff's attorney requested that the IRS release the levy on Ms. Ferrel's account.The IRS immediately released the levy, before the expiration of the 21-day hold.No funds had been removed under the notice of levy.

The IRS had levied the same account on at least one prior occasion on June 8, 1992.Ms. Ferrel attempted to obtain release of that 1992 levy without the services of an attorney.According to the plaintiff, the IRS did not release the 1992 levy and proceeded to remove funds from her account at that time.In addition, the plaintiff claims that the Ferrels' 1992 joint tax refund was community property but that the IRS intercepted the entire joint tax refund to satisfy Mr. Ferrel's separate tax penalty.She further believes that the levies will continue on her separate account because her husband's tax liability may continue for over twenty years.

On April 27, 1993, the plaintiff through her attorney filed an administrative claim with the IRS for damages arising from the notice of levy.The IRS denied the claim by letter dated May 12, 1993.Meanwhile, the plaintiff filed the present claim naming Ann Brown, Seattle District Director of Internal Revenue, Timothy A. Towns, and the United States as defendants.She seeks damages under 26 U.S.C. §§ 7426,7432, and7433 to compensate the alleged cloud on her reputation and harm to her credit from the released levy and potential future levies.She also seeks temporary and permanent injunctions under § 7426 against future levies.She further asks for attorney's fees under 28 U.S.C. § 2412and26 U.S.C. § 7430.The defendants have filed a motion to dismiss for lack of jurisdiction or in the alternative for summary judgment on all claims.

II.DISCUSSION

A.Immunity of Internal Revenue Service Officers

As an initial matter, this court must consider whether the plaintiff may maintain claims against individual IRS agents, Brown and Towns, or whether they enjoy immunity to suit.She argues that Brown and Towns acted outside their official capacities and therefore are individually liable.

A claim against IRS employees acting in their official capacities is treated as an action against the United States.Atkinson v. O'Neill,867 F.2d 589, 590(10th Cir.1989);Gilbert v. DaGrossa,756 F.2d 1455, 1458(9th Cir.1985);see alsoHawaii v. Gordon,373 U.S. 57, 58, 83 S.Ct. 1052, 1052-53, 10 L.Ed.2d 191(1963)("The general rule is that relief sought nominally against an officer is in fact against the sovereign if the decree would operate against the latter.").An exception to this general rule may arise in a so-called "Bivens" claim, which allows suits for damages against federal officials for federal constitutional violations.Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics,403 U.S. 388, 397, 91 S.Ct. 1999, 2005, 29 L.Ed.2d 619(1971);see alsoGilbert,756 F.2d at 1459.

In § 7426Congress explicitly incorporated an employee immunity into the tax code: "No action may be maintained against any officer or employee of the United States ... with respect to any acts for which an action could be maintained under this section."26 U.S.C. § 7426(d);see alsoWinebrenner v. United States,924 F.2d 851, 855 & n. 4(9th Cir.1991);Baddour,802 F.2d at 806-09(holding that § 7426"explicitly bars" an action against IRS employees);Smith v. United States,1993 U.S.Dist. LEXIS 11933, at *9-10(D.IdahoJuly 19, 1993)(holding individual IRS agents are shielded by qualified immunity from constitutional tort claims arising from tax levies);Waring Park v. IRS,1993 WL 245597, at *2, 1993 U.S.Dist. LEXIS 5807, at *5(D.Or.April 22, 1993)(dismissing Bivens claim against IRS agents for wrongful levy).Section 7426 goes on to demand the substitution of the United States as defendant in any claim brought against its employees.26 U.S.C. § 7426(e).

Equally, where a taxpayer alleges that an IRS employee "recklessly or intentionally disregards any provision of this title, or any regulation promulgated under this title,"the statute makes a suit against the United States "the exclusive remedy for recovering damages resulting from such actions."26 U.S.C. § 7433(a).This section likewise has been held to be an adequate remedy for constitutional torts and therefore to protect employee immunity.SeePark,1993 WL 245597, at *2.Accordingly, Brown and Towns are immune from plaintiff's claims, and she is limited to seeking relief from the United States as a defendant.

B.Jurisdiction

Plaintiff claims that this court has jurisdiction under 28 U.S.C. §§ 1331and1340 and under 26 U.S.C. §§ 7426,7432, and7433.¹Section 1340 does afford the court subject matter jurisdiction: "The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue...."28 U.S.C. § 1340;Arford v. United States,934 F.2d 229, 231(9th Cir.1991).Sections 1340and1331, however, merely operate as grants of general jurisdiction and require an accompanying waiver of sovereign immunity.Arford,934 F.2d at 231;Gilbert v. DaGrossa,756 F.2d 1455, 1458(9th Cir.1985);DeMasters v. Arend,313 F.2d 79, 84(9th Cir.), cert. dismissed,375 U.S. 936, 84 S.Ct. 341, 11 L.Ed.2d 269(1963).By the doctrine of sovereign immunity, the federal government must consent to be sued.United States v. Mitchell,445 U.S. 535, 538, 100 S.Ct. 1349, 1351-52, 63 L.Ed.2d 607(1980);Gilbert,756 F.2d at 1458.

Waivers of sovereign immunity are narrow and "must be `construed strictly in favor of the sovereign.'"United States v. Nordic Village, Inc.,___ U.S. ___, ___, 112 S.Ct. 1011, 1015, 117 L.Ed.2d 181(1992)(quotingRuckelshaus v. Sierra Club,463 U.S. 680, 685, 103 S.Ct. 3274, 3278, 77 L.Ed.2d 938(1983)).Such waivers of sovereign immunity must be "unequivocally expressed."Mitchell,445 U.S. at 538, 100 S.Ct. at 1351;United States v. King,395 U.S. 1, 4, 89 S.Ct. 1501, 1502-03, 23 L.Ed.2d 52(1969).Without a waiver of sovereign immunity, the action must be dismissed.Gilbert,756 F.2d at 1458.Plaintiff's claims under §§ 7426,7432, and7433 thus must fall into the narrow waivers of sovereign immunity under those statutes to withstand defendants' motion to dismiss for lack of jurisdiction.

C.Plaintiff's § 7426 Claim

1.Damages

The court lacks jurisdiction over plaintiff's claim for damages for wrongful levy under § 7426.The statute explicitly provides that "the district court shall have jurisdiction to grant only such of the following forms of relief."26 U.S.C. § 7426(b)(emphasis added).Section 7426(b) then lists the only four remedies available for wrongful levy: (1) injunction; (2) recovery of property; (3) judgment for surplus proceeds from sale of property; and (4) judgment for substituted sale proceeds.26 U.S.C. § 7426(b)(1)-(4).As damages do not constitute one of the exclusive remedies available under § 7426, the court dismisses the claim for damages under § 7426.

2.Injunctive Relief

Section 7426 allows a cause of action against the United States where the IRS imposes a tax levy on the property of an innocent third party:

If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon, may bring a civil action against the United States.

26 U.S.C. § 7426(a)(1).

The Government does not dispute that the plaintiff is an innocent third party, that she has sole interest in the levied account, and that the levy was wrongful when imposed.Nevertheless, the United States argues that the United States has waived sovereign immunity under § 7426 only for claims by third parties with existing levies.The court agrees.

Courts considering this issue have held that any wrongful levy action requires an existing levy.Sovereign immunity is waived under § 7426"only to the extent a person claiming an interest in property is aggrieved by the pendency of an existing lien" or levy.Three "M" Investments, Inc. v. United States,781 F.2d 352, 354(10th Cir.1986).If the levy has been released prior to commencement of the current action, the government maintains...