Kabakjian v. U.S.

• Decision Date: 12 April 2000
• Docket Number: No. Civ.A. 97-5906.,Civ.A. 97-5906.
• Citation: 92 F.Supp.2d 435
• Parties: Edward KABAKJIAN and Nancy B. Kabakjian, v. UNITED STATES of America, Luann Parmer, William Snider and Nancy Snider.
• Court: U.S. District Court — Eastern District of Pennsylvania

92 F.Supp.2d 435

Edward KABAKJIAN and Nancy B. Kabakjian, v. UNITED STATES of America, Luann Parmer, William Snider and Nancy Snider.

No. Civ.A. 97-5906.

United States District Court, E.D. Pennsylvania.

April 12, 2000.

COPYRIGHT MATERIAL OMITTED

Edward Kabakjian, Pennsburg, PA, pro se.

Nancy B. Kabakjian, Pennsburg, PA, pro se.

Melvin E. Newcomer, Lancaster, PA, Charles M. Flesch, Shannon Cohen, Dept. of Justice, Washington, DC, David L. Ashworth, Lancaster, PA, for defendants.

MEMORANDUM

WALDMAN, District Judge.

I. Introduction

Plaintiffs assert claims for damages against the United States under the Internal Revenue Code, 26 U.S.C. §§ 7433 & 7432, for the allegedly improper tax sale of their property and failure to release tax liens filed by the Internal Revenue Service with two Pennsylvania county prothonotaries.¹

26 U.S.C. § 7433(a) provides a cause of action for damages to a taxpayer from the reckless, intentional or negligent disregard by any IRS official or employee of any provision of the Internal Revenue Code or regulation promulgated thereunder. "[U]pon a finding of liability," a plaintiff may recover the "actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent actions of the [IRS] official or employee" up to $1,000,000 or $100,000 in a case of negligence, plus the costs of the action. See 26 U.S.C. § 7433(b).² 26 U.S.C. § 7432(a) provides a cause of action for damages resulting from the knowing or negligent failure of an IRS official or employee to release a lien on a taxpayer's property. "[U]pon a finding of liability," the taxpayer may recover any "actual, direct economic damages" which "but for the actions of the defendant, would not have been sustained," plus the costs of the action. See 26 U.S.C. § 7432(b).

Plaintiffs seek to recover pursuant to § 7433 the difference between the amount realized from the tax sale and the amount they allege their property was worth plus lost rental income. Plaintiffs' claim for damages under § 7432 is predicated on a denial of their application for a platinum mastercard, allegedly because of the liens.

The court has original jurisdiction over these claims pursuant to 28 U.S.C. § 1331.³ Presently before the court is the motion of the United States for summary judgment.

II. Legal Standard

In considering a motion for summary judgment, the court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564, 568 (3d Cir.1986). Only facts that may affect the outcome of a case are "material." See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. All reasonable inferences from the record must be drawn in favor of the non-movant. See id. at 256, 106 S.Ct. 2505.

Although the movant has the initial burden of demonstrating the absence of genuine issues of material fact, the non-movant must then establish the existence of each element on which it bears the burden of proof. See J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)), cert. denied, 499 U.S. 921, 111 S.Ct. 1313, 113 L.Ed.2d 246 (1991). A plaintiff cannot avert summary judgment with speculation or by resting on the allegations in his pleadings, but rather must present competent evidence from which the fact-finder could reasonably find in his favor. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Ridgewood Bd. of Educ. v. N.E. for M.E., 172 F.3d 238, 252 (3d Cir. 1999); Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir.1989); Woods v. Bentsen, 889 F.Supp. 179, 184 (E.D.Pa.1995).

III. Facts

From the competent evidence of record, as uncontroverted or otherwise taken in the light most favorable to plaintiffs, the pertinent facts are as follow.

On December 17, 1995, the Internal Revenue Service ("IRS") seized plaintiffs' property at 1730 Valley Forge Road, Lancaster, Pennsylvania for failure to pay taxes. On February 23, 1996, the IRS sold the real property to defendants William and Nancy Snider and LuAnn Palmer as the highest bidders in a public sealed bid sale. The IRS issued a deed conveying title to the purchasers on September 18, 1996, following the expiration of the 180 day redemption period.

On October 5, 1995, Revenue Officer Chesna White estimated the value of plaintiffs' property at $100,000 based on an external viewing during a drive-by. By December 4, 1995, Ms. White had determined a market value of $80,000 on IRS Form 2433. Using the IRS Minimum Bid Worksheet, Form 4585, Officer White then established a reduced forced sale value of $48,000 and a minimum bid price of $36,178.33. The reduction from $80,000 to $48,000 reflects adjustments within IRS guidelines for the forced nature of the sale and marketability factors specific to the county of sale. The minimum bid price was dictated by a provision in the IRS manual which sets a ceiling for a minimum bid at the sum of the tax owed, interest, penalties and expenses of sale. The Minimum Bid Worksheet prepared by Officer White was reviewed and approved by an IRS Group Manager.

On December 11, 1995, Ms. White sent notice of levy, notice of seizure and a copy of the Minimum Bid Worksheet by certified mail to plaintiffs at their personal residence at 1730 Fels Road, Pennsburg, Pennsylvania. On January 24, 1996, she sent notice of the sale by certified mail. On January 29, 1996, she posted public notice of the sale at the Lancaster County Post Office and at the place of sale and mailed notice to real estate agents and individuals on the bidding list. On February 1, 1996, she posted notice on the seized property. On February 8, 1996 notice of the sale was published in an area newspaper.

Plaintiffs' usual place of abode was within the internal revenue district where the seizure and sale of the property occurred. The IRS neither served plaintiffs in person with written notice of the seizure and sale nor left such notice at their usual abode. Plaintiffs do not dispute that they timely received actual notice of the seizure and sale via certified mail for which receipts were signed on December 15, 1995 and January 27, 1996 respectively.⁴

In October 1992, September 1995 and December 1995, the IRS had filed Notices of Federal Tax Lien with the Lancaster and Bucks County prothonotaries referring to plaintiffs' tax liabilities for the years 1987, 1988, 1989 and 1993.⁵

The property was sold for $65,509 of which $38,050.19 was applied to plaintiffs' tax liability, leaving a surplus of $27,458.81. Because the IRS believed that plaintiffs may have had other tax debts at the time the property was sold, it did not provide a refund to plaintiff from the sale until October 19, 1998.

On May 15, 1997, plaintiffs filed an administrative claim for damages pursuant to Treasury Regulation 26 C.F.R. § 301.7432-1. Although they had not previously filed a proper request for certificate of release of lien pursuant to Treasury Regulation 26 C.F.R. § 401.6325-1(f), they included such a request with their administrative claim. By letter of May 21, 1998, Department of Justice attorney Shannon Cohen advised IRS District Counsel H. Stephen Kesselman that plaintiffs' claim to excess proceeds from the sale appeared valid and recommended that any true surplus be refunded and any corresponding liens be released immediately. The IRS refunded the surplus on October 19, 1998 and released the liens on November 2, 1998.

Plaintiffs received the refund check for $33,445.85, representing the surplus plus interest. They have refused to cash the check, however, as part of their continuing "protest" against the IRS.⁶

In response to a solicitation or "invitation" from MBNA America Bank, Mr. Kabakjian applied for a platinum mastercard in 1996 or early 1997. He was advised by correspondence of February 20, 1997 from a bank employee that his application could not be approved because he "did not meet the eligibility conditions stated in [his] invitation" as it appeared from a credit report that there were "liens or judgments against [him]." The letter continued that the bank nevertheless "attempted to qualify [his] application on a non-preapproved basis" but determined he was ineligible because of "a history of delinquency with [his] creditors."

As a result of the denial of this credit card, plaintiffs were unable to take advantage of travel opportunities presented "on two occasions" in telephone solicitations from a travel agency in Ft. Lauderdale sometime between February 1996 and February 1997.⁷ With each solicitation, plaintiffs were offered vacation packages to several different destinations including Ft. Lauderdale, the Bahamas and Brandon, Michigan. Mr. Kabakjian acknowledged that he could afford to pay cash for these trips but that the travel agency required him to provide a credit card number immediately over the telephone to book them. He acknowledged traveling to "a variety of places" during this period, including Florida and Brandon, Michigan. On some of those trips plaintiffs "piggy-backed" on relatives' credit cards and then paid them back in cash.

IV. Discussion

A. Section 7433 Claim

Plaintiffs assert that the IRS disregarded the notice provisions of 26 U.S.C § 6335(a) & (b) when the agency provided notice of the seizure and sale respectively by certified mail rather than personal delivery as prescribed when the property owner has a dwelling or business within the internal revenue district where the seizure occurs.⁸

Plaintiffs also assert that "Officer White intentionally violated the minimum price...