Floyd v. United States

• Decision Date: 27 May 1965
• Docket Number: Civ. A. No. 4362.
• Parties: Fred FLOYD, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of South Carolina

241 F. Supp. 996

Fred FLOYD, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. A. No. 4362.

United States District Court W. D. South Carolina, Anderson Division.

May 27, 1965.

C. S. Bowen, Greenville, S. C., for plaintiff.

John C. Williams, U. S. Atty., Robert O. Dupre, Asst. U. S. Atty., Greenville, S. C., for defendant.

SIMONS, District Judge.

Plaintiff alleges in his complaint that defendant erroneously claims that he and his wife Pauline Floyd, as a partnership, owned and operated a supper club in Pickens County, South Carolina, during the years 1954 to 1960; that as a partner in said business plaintiff is liable for payment of certain cabaret taxes, penalties and interest¹ allegedly due as a result of the operation of the said supper club during the foregoing period of time; that a tax lien has been entered against plaintiff for the amounts allegedly owed; and that certain real property owned by plaintiff has been seized by defendant pursuant to Notice of Seizure, on or about May 21, 1965, for purpose of selling said property for payment of the taxes due. Plaintiff further alleges that Pauline Floyd, his wife, has always been the sole owner of the supper club; that he has never been a partner in, nor had any other interest in, the said business and owes no taxes due therefrom; and that unless the court grants relief as prayed for plaintiff will suffer irreparable injury and damage in that his property will be sold for the taxes allegedly owed. He further contends that he has no adequate remedy at law, since he is financially unable to pay the tax and sue for a refund. The prayer of plaintiff's complaint seeks a judicial determination as follows:

"1 That plaintiff is not, and has never been, the owner of the Casablanca Supper Club, and has not, and has never had, any ownership interest therein, either through a partnership with Pauline Floyd or with any one else "2 That plaintiff is not the or a taxpayer in reference to the taxes, penalties and interest mentioned in this complaint "3 That there is no legal or other liability, obligation or duty resting upon the plaintiff to pay the taxes, penalties or interest mentioned in this complaint "4 That the defendant had no legal right or authority to levy the taxes, penalties and interest mentioned in this complaint against the plaintiff herein, and that defendant's action in that regard is null and void; and that the same be vacated and set aside "5 That the defendant had no legal right or authority to enter of record the tax lien mentioned in this complaint, against the plaintiff and his property, and that the said record be ordered cancelled as to this plaintiff and his property "6 That the defendant had no legal right or authority to seize the property mentioned in this complaint, and that its action in that regard be declared null and void, and that said seizure be vacated and set aside; "7 That the defendant be enjoined and restrained from further harassing this plaintiff in regard to the payment of said alleged taxes, penalties and interest; "8 That this Court issue such temporary orders and permanent decrees as may be necessary to protect the rights of this plaintiff; and, "9 For such other and further relief to which plaintiff may be entitled in law or in equity."

The main thrust of plaintiff's contention is that under the facts alleged in the complaint plaintiff herein is not in reality a "taxpayer" since he at no time owned any interest in the supper club against which the taxes were assessed, and under no circumstances could he be liable for the alleged taxes; consequently, defendant has wrongfully and illegally levied upon his property for the taxes due and owing by his wife, who was the sole owner and operator of said supper club; and that he is entitled to maintain this action to quiet title to his real estate, and to remove the cloud of the federal tax lien therefrom. Plaintiff strongly urges that defendant has waived its sovereign immunity to such action and has consented to be sued in this court under the provisions of Title 28 U.S.C. § 2410a.²

Plaintiff's complaint was originally filed in the Court of Common Pleas, Pickens County, S. C., on May 29, 1963. The United States filed motion for removal, and moved said action to this court pursuant to 28 U.S.C. § 1444.³ On July 19, 1963, defendant filed motion to dismiss plaintiff's complaint upon following grounds:

"1 That this court lacks jurisdiction of the subject matter of this suit, because this action seeks to enjoin the collection of internal revenue taxes assessed against the plaintiff, which is prohibited by Section 7421 of the Internal Revenue Code of 1954 26 U.S.C. Section 7421; 2 that this court lacks jurisdiction of the subject matter of this suit because this action involves a controversy with respect of federal taxes assessed against him, which is prohibited by Section 2201, Title 28, United States Code 28 U.S.C. Section 2201; 3 that this court lacks jurisdiction of the defendant, United States of America, since this action is a suit against the United States, with respect to a matter which the United States has not waived its sovereign immunity."

Defendant's motion to dismiss was heard March 19, 1965, with counsel for parties presenting oral arguments. In answer to plaintiff's contention that he was entitled to equitable relief under the circumstances presented here because he had no adequate remedy at law, defendant contended that no sufficient facts were alleged in the complaint to support the conclusion that the plaintiff had no adequate remedy at law, or to show that irreparable damage would result to him in the absence of injunctive relief by the court. Consequently, at the conclusion of the hearing upon request leave was granted plaintiff's counsel to file an affidavit setting forth facts in support of the allegations of undue hardship, irreparable injury and lack of adequate remedy at law contained in plaintiff's complaint.⁴

In support of its contention that this action must be dismissed, defendant asserts that this is not in actuality an action to quiet title within the scope of 28 U.S.C. § 2410a,⁵ but instead is an attempt on the part of plaintiff to attack the merits of a tax assessment by declaring that plaintiff owes no tax liability to defendant; and that the United States has not waived its sovereign immunity to suit in such a case.

After a careful study and consideration of briefs submitted by counsel for both parties, and after reading and studying the cases and authorities cited therein, this court can reach no conclusion other than that this is essentially a suit to determine the validity of the tax assessed against the plaintiff by the defendant, and that the defendant has not withdrawn its sovereign immunity to such an action under the provisions of Section 2410a, supra.

Formerly there was some case authority to support the proposition that a taxpayer could bring such an action to determine the validity of a tax assessment in a suit to quiet title under the authority of said Section 2410a. See Sonitz v. United States, 221 F.Supp. 762 D.C.N.J.1963; United States v. Coson, 286 F.2d 453 9th Cir. 1961. However, later decisions have held consistently that a taxpayer may not use said Section as a means to contest the merits of a tax assessment, predicated upon a suit to quiet title. Broadwell v. United States, 234 F.Supp. 17 D.C.N.C.1964, aff'd. 4th Cir. March 8, 1965, 343 F.2d 470; Cooper Agency v. McCleod, 235 F.Supp. 276 D. C.S.C.1964; Quinn v. Hook, 231 F.Supp. 718 D.C.Pa.1964; aff'd. 341 F.2d 920 3rd Cir. March 2, 1965; Batts v. United States, 228 F.Supp. 272 D.C.N.C.1964; Falik v. United States, 343 F.2d 38, 2nd Cir. March 1965.⁶ In Broadwell, supra, the district court stated:

"In light of the legislative history of Section 2410a it is apparent that the consent of the government, given under that section, does not extend to a taxpayer's attack on the merits of a tax assessment through the vehicle of a suit to quiet title. As stated by Judge Freeman of the Eastern District of Pennsylvania in Quinn et al. v. Hook, supra:

"`The purpose of the amendment, as clearly stated in the House and Senate reports, "is to permit the United States to be made a party defendant in cases involving foreclosure of mortgages or liens on personal property and to provide a method to clear real estate titles of questionable or valueless Government liens." Its passage was recommended by Attorney General Jackson in order to protect good faith purchasers of real estate and foreclosing mortgagees.'"

In affirming the district court's determination in Broadwell, the Fourth Circuit, in its Per Curiam opinion of March 8, 1965, said:

"By quia timet suits against the United States under 28 U.S.C. § 2410, Waverly C. Broadwell, Nancy, his wife, and Dohn Broadwell, appellants, endeavored to remove the lien on their properties of income taxes assessed upon them for the year 1959. The object of the complaints, the appellants candidly concede, was to dispute the validity of the assessments. With the District Judge, and for the reasons he gives in his memorandum on dismissing the actions, 234 F.Supp. 17, we think: 1 that 28 U.S.C. § 2410 is not available for the purpose for which it is now invoked, * * *."

From the tenets of the foregoing authorities, it is clear that the Government has not withdrawn its sovereign immunity and consented to be made a party to this action to quiet title under 28 U.S.C. § 2410a; and that this court does not have jurisdiction under said section to entertain this action.

Plaintiff next contends that, under its broad equity powers, this court should declare that plaintiff is not liable for the assessed taxes, and should issue its injunction restraining the Government from further harassing plaintiff in regard to the payment of alleged taxes owed, since he has no adequate remedy at law, in that he...