In re Harchar, No. 07-3184.

• Decision Date: 14 July 2008
• Docket Number: No. 07-3184.
• Citation: 393 B.R. 160
• Parties: In re Kenneth and Andrea HARCHAR, Debtor(s). Kenneth and Andrea Harchar, Plaintiff(s) v. United States of America, Defendant(s).
• Court: U.S. Bankruptcy Court — Northern District of Ohio

393 B.R. 160

In re Kenneth and Andrea HARCHAR, Debtor(s) Kenneth and Andrea Harchar, Plaintiff(s) v. United States of America, Defendant(s).

No. 07-3184.

United States Bankruptcy Court, N.D. Ohio.

July 14, 2008.

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Susan M. Gray, Susan M. Gray Attys & Counselors at Law, Rocky River, OH, Thomas C. Loepp, Stow, OH, for Plaintiffs.

Anita M. Gill, Cleveland, OH, Peter A. Sklarew, Tax Division, Dept. of Justice, Washington, DC, for Defendants.

DECISION AND ORDER

RICHARD L. SPEER, Bankruptcy Judge.

This cause comes before the Court on the Motion of the Defendant for Summary Judgment, and the Plaintiffs' Cross Motion for Summary Judgment. In support of their respective Motions, both Parties filed supporting evidentiary materials, as well as extensive Memoranda regarding their positions. The Court has now had time to review all these materials, and finds, for the reasons set forth herein, that the Defendant's Motion for Summary Judgment should be Granted, and that the Plaintiffs Motion for Summary Judgment should be Denied.

BACKGROUND

On May 1, 1998, the Debtors/Plaintiffs, Kenneth and Andrea Harchar (hereinafter the "Debtors"), filed a petition for relief under Chapter 13 of the United States Bankruptcy Code. The Defendant, the United States of America (a.k.a., the "IRS"), was a creditor in the case by virtue of a prepetition tax arrearage owed by the Debtors. The following August, the plan of reorganization put forth by the Debtors was confirmed by the Court. In their plan of reorganization, the Debtors proposed to pay priority tax claims held by the Defendant in full; unsecured, nonpriority claims held by the Defendant, as well as other similarly situated creditors, were to be paid 5% over 43 months.

On June 12, 2000, the Debtors commenced the instant adversary against the Defendant alleging that the IRS caused them injury by wrongfully delaying to refund their tax overpayments for the years 1999 and 2000. A key component of the Debtors' Complaint stems from what is known as the V-Freeze. This is an administrative action, internally implemented by the IRS, whereby computer-automated transactions are suspended. In this particular case, the V-Freeze was implemented shortly after the Debtors filed their bankruptcy petition and had the effect of interrupting the automatic issuance of their tax refunds. Instead, any tax refund owed to the Debtors could only be issued if individually approved by an IRS representative.

As the legal basis for their Complaint, the Debtors allege that the Defendant's implementation of the V-Freeze, along with other conduct it undertook, resulted in the following: (1) a violation of the automatic stay of 11 U.S.C. § 362(a); (2) a violation of the Bankruptcy Code's anti-discrimination provision as set forth in 11 U.S.C. § 525; (3) a deprivation of their right of due process under the United States Constitution; and (4) a breach of the terms of their confirmed Chapter 13 plan. As redress, the Debtors' Complaint sought compensatory damages, including attorney fees, punitive damages, as well declaratory and injunctive relief.

At the present time, however, based upon prior court rulings and by agreement of the Parties, the issue now before the Court on the Parties' motions for summary judgment has been limited in a couple of important respects. First, only the Defendant's alleged liability for a violation of the automatic stay is at issue. In particular, the matter before the Court is limited to whether the Defendant violated either paragraph (3) or (6) of § 362(a). Second, by agreement of the Parties, the Court's focus in this matter is limited to the events surrounding the Debtors' 1999 tax refund, with the adjudication of the Debtors' 2000 year tax refund being placed in abeyance pending the resolution of this matter.

Concerning these limitations, the events, as now outlined in the time-line below, were not contested:

On February 20, 2000, the Debtors filed their 1999 tax return.

On March 20, 2000, based upon internal administrative procedures, the Debtors' 1999 tax overpayment, totaling $4,303.00, was posted to the Debtors' account.

On April 20, 2000, the Debtors' account with the IRS was referred internally to its legal counsel for possible action.

On April 27, 2000, the IRS filed a Motion in the Debtors' bankruptcy case to modify their plan based upon the funds available from their 1999 tax refund.

On June 13, 2000, the Court held a hearing on the motion to modify, at which time the Debtors were directed to file amended bankruptcy schedules.

On July 7, 2000, the Debtors filed their amended bankruptcy schedules.

On July 11, 2000, the IRS withdrew its motion to modify the Debtors' Chapter 13 plan.

On July 18, 2000, the IRS issued a refund check to the Debtors. Included in the refund check was an interest payment of $101.69.

In addition, during this same period of time — particularly, beginning April 19, 2000 — the evidence also reflects that the Debtor, Mrs. Harchar, made a number of calls to the IRS inquiring about the status of her tax refund. Although the evidence shows that her memory with respect to these calls was not always clear, it is accepted that Mrs. Harchar was never able to receive a definitive answer regarding the status of her refund. It is also accepted, for purposes of the matter now before the Court, that Mrs. Harchar was told by an IRS representative that she did not "deserve" her 1999 tax refund.

PROCEDURE

The instant matter is before the Court on the Parties' Cross Motions for Summary Judgment. Federal Rule of Civil Procedure 56(c), which is made applicable to this proceeding by Bankruptcy Rule 7056, sets forth the standard for a summary judgment motion and provides, in part: A party will prevail on a motion for summary judgment when "[t]he pleadings, depositions, answers to interrogatories, and admission on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). With respect to this standard, the movant must demonstrate all the elements of his cause of action. R.E. Cruise Inc. v. Bruggeman, 508 F.2d 415, 416 (6th Cir.1975). In making this determination, the Court is directed to view all the facts in a light most favorable to the party opposing the motion. Matsushita v. Zenith Radio Corp., 475 U.S. 574, 586-88, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). In addition, in cases such as this where the Parties have filed Cross Motions for Summary Judgment, the Court must consider each motion separately, since each party, as a movant for summary judgment, bears the burden of establishing both the nonexistence of genuine issues of material fact, and that party's entitlement to judgment as a matter of law. French v. Bank One, Lima N.A. (In re Rehab Project, Inc.), 238 B.R. 363, 369 (Bankr.N.D.Ohio 1999).

As the starting point for this discussion, an initial word on the overall course this proceeding has traveled is necessary. Since the Debtors filed their Complaint, more than eight years ago, a long and contentious history has followed. It suffices to say in this regard that this proceeding, originally assigned to Judge Morgenstern-Clarren, but recently transferred to this Court, has involved a contorted history through which both of the Parties have been able to form a knot which would have made Alexander shudder.¹ By way of example, in just terms of resources, this proceeding is alleged to have cost the Debtors approximately $100,000.00 in attorney fees, not to mention the substantial resources expended by the United States, for a case in which the Debtors' actual damages are admittedly limited — no more than $1,500.00 for each of the Debtors.

The extensive history of the case has also seen the filing of numerous and potentially dispositive motions, from which a number of decisions have resulted, including two decisions rendered from the appeal of the bankruptcy court's orders. United States v. Harchar, 331 B.R. 720 (N.D.Ohio 2005) (J. Wells); United States v. Harchar, 371 B.R. 254 (N.D.Ohio 2007) (J. Gaughan). As a result, certain aspects regarding the Debtors' Complaint for a stay violation have already been addressed. And to the extent applicable, these holdings will, in accordance with the law of the case doctrine, not be disturbed.

The "law of the case" doctrine holds that "a court should not reopen issues decided in earlier stages of the same litigation." Agostini v. Felton, 521 U.S. 203, 236, 117 S.Ct. 1997, 2017, 138 L.Ed.2d 391 (1997). The doctrine has been further defined to mean that "findings of fact and conclusions of law by an appellate court are generally binding in all subsequent proceedings in the same case in the trial court or on a later appeal." This That and the Other Gift and Tobacco, Inc. v. Cobb County, Georgia, 439 F.3d 1275, 1283 (11th Cir.2006). The doctrine is grounded in the concept of consistency so that matters, once decided during the course of the same lawsuit, will continue thereafter, notwithstanding that different courts may come to hear the case. All the same, an actual decision of an issue is required to establish the law of the case. The law of the case doctrine, thus, will not reach to include any matter that was not actually decided. Quern v. Jordan, 440 U.S. 332, 347 n. 18, 99 S.Ct. 1139, 1148 n. 18, 59 L.Ed.2d 358 (1979) ("The doctrine of law of the case comes into play only with respect to issues previously determined.").

DISCUSSION

By way of their respective Motions for Summary Judgment, the Parties have submitted to the Court one overall issue for resolution: whether the Defendant's conduct with regards to the Debtors' 1999 tax refund resulted in a violation of the Bankruptcy Code's automatic stay? Pursuant to 28...