Lonsdale v. U.S.

Decision Date20 November 1990
Docket NumberNo. 90-2113,90-2113
Citation919 F.2d 1440
Parties-1049, 90-2 USTC P 50,581 Eugene M. LONSDALE, Patsy R. Lonsdale, his wife in Propria Persona Sui Juris, Plaintiffs-Appellants, v. UNITED STATES of America and Does 1 through 100, Defendants-Appellees. . Submitted on the Briefs. *
CourtU.S. Court of Appeals — Tenth Circuit

Eugene M. Lonsdale and Patsy R. Lonsdale, pro se.

Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen, Kenneth L. Greene and Joan I. Oppenheimer, Attys., Tax Div., Dept. of Justice, Washington, D.C., William L. Lutz, U.S. Atty., of Counsel, for defendants-appellees.

Before ANDERSON, BALDOCK and EBEL, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

Eugene M. Lonsdale, Sr. and Patsy R. Lonsdale commenced this suit against the United States 1 seeking to prevent Internal Revenue Service levies on their wages and a credit union account, for unpaid income taxes on wages for the years 1981 through 1987. The complaint, styled as a quiet title action, asserts that the government has no power to tax wages and, therefore, lacks the right to collect unpaid income taxes assessed against the Lonsdales. It further asserts that the Internal Revenue Service has no power to impose levies because orders delegating such power were not published in the Federal Register as required by law, and because the relevant IRS forms do not carry an Office of Management and Budget control number allegedly as required by the Paperwork Reduction Act of 1980, 44 U.S.C. Secs. 3501-3520.

The government moved to dismiss on jurisdictional grounds, and, in the alternative, for failure to state a claim upon which relief could be granted. Fed.R.Civ.P. 12(b)(6). The district court granted the motion without specifying the basis upon which it relied. The Lonsdales' subsequent motion for reconsideration was denied. On appeal the Lonsdales reassert the arguments which they made in the district court and raise other issues as well. However, because the dismissal below was necessarily based upon the complaint itself, we address only those matters pled in the complaint. For the reasons stated below, we affirm the dismissal of the Lonsdales' action.

I. JURISDICTION

We agree with the government that this suit is barred by the Anti-Injunction Act, 26 U.S.C. Sec. 7421(a), which provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person...." The statute excepts petitions to the United States Tax Court for a redetermination of a proposed deficiency, 26 U.S.C. Secs. 6212(a) and (c), 6213(a), and certain civil suits in the district court, 26 U.S.C. Secs. 7426(a) and (b)(1), 6672(b), 6694(c) and 7429(b). Taxpayers may also sue in the proper district court or the United States Claims Court for a refund of taxes paid. 26 U.S.C. Sec. 7422. A judicial exception to the act permits an injunction

if the taxpayer demonstrates that: 1) under no circumstances could the government establish its claim to the asserted tax; and 2) irreparable injury would otherwise occur. Bob Jones University v. Simon, 416 U.S. 725, 737, 94 S.Ct. 2038, 2046 [40 L.Ed.2d 496] (1974); Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 6-8, 82 S.Ct. 1125, 1128-29 [8 L.Ed.2d 292] (1962).

Souther v. Mihlbachler, 701 F.2d 131, 132 (10th Cir.1983).

The Lonsdales' complaint states that it seeks injunctive and declaratory relief as well as a refund of amounts collected pursuant to the levies in question. But their complaint is essentially an attempt to prevent the collection of assessed taxes by challenging the underlying tax assessments. That challenge violates the Anti-Injunction Act on its face. The ways to challenge assessments and collections are set forth above. This suit is not one of them.

The Lonsdales seek to avoid the jurisdictional restrictions of the Anti-Injunction Act by characterizing their action as one to quiet title and alleging jurisdiction under 28 U.S.C. Sec. 2410(a) which provides in relevant part:

[T]he United States may be named a party in any civil action or suit in any district court ... having jurisdiction of the subject matter to quiet title to ... real or personal property on which the United States has or claims a mortgage or other lien.

We reject the proposition that 28 U.S.C. Sec. 2410 provides jurisdiction for an action essentially contesting liability for assessed taxes, where the taxpayers have had the elective opportunity described above--whether or not used--to seek a redetermination in the tax court or a refund of contested payments in the district court. The Anti-Injunction Act begins with the phrase "no suit."

The intent behind the statute is the protection of the government's need to assess and collect taxes as expeditiously as possible without preenforcement judicial interference and to require that disputed sums of taxes due be determined in suits for refund.

Lowrie v. United States, 824 F.2d 827, 830 (10th Cir.1987).

Thus, this and other courts have rejected attempts by taxpayers to invoke the waiver of sovereign immunity for the purpose of circumventing the time honored "pay first, litigate later" rule, by framing their contest of the Government's tax assessment or collection actions in the guise of a quiet title action. See Schmidt v. King, 913 F.2d 837 (10th Cir.1990); Pollack v. United States, 819 F.2d 144 (6th Cir.1987); Laino v. United States, 633 F.2d 626, 633 n. 8 (2d Cir.1980); Mulcahy v. United States, 388 F.2d 300 (5th Cir.1968); Falik v. United States, 343 F.2d 38 (2d Cir.1965); Pipola v. Chicco, 274 F.2d 909, 913-914 (2d Cir.1960); Quinn v. Hook, 231 F.Supp. 718, 720 (E.D.Pa.1964), aff'd per curiam, 341 F.2d 920 (3d Cir.1965); McCann v. United States, 248 F.Supp. 585 (E.D.Pa.1965); Broadwell v. United States, 234 F.Supp. 17 (E.D.N.C.1964), aff'd, 343 F.2d 470 (4th Cir.1965), cert. denied, 382 U.S. 825, 86 S.Ct. 57, 15 L.Ed.2d 70 (1965); Shaw v. United States, 321 F.Supp. 1267 (D.Vt.1970), aff'd, 71-1 U.S.T.C., para. 9220 (2d Cir.1970), cert. denied, 402 U.S. 909, 91 S.Ct. 1378, 28 L.Ed.2d 650 (1971). The bulk of the complaint in this case, which simply contests the assessment of income taxes, falls within the category and the prohibitions described.

The Lonsdales argue that Sec. 2410 at least confers jurisdiction upon the part of their suit that challenges the levies in question on the grounds that the Internal Revenue Service has no lawful delegation of authority to issue levies, and that the Paperwork Reduction Act has been violated. We have recognized that "[w]hen the taxpayer challenges the procedural regularity of [a] tax lien and the procedures used to enforce the lien, and not the validity of the tax assessment, sovereign immunity is waived." Schmidt v. King, 913 F.2d at 839; National Commodity and Barter Ass'n v. Gibbs, 886 F.2d 1240, 1246, n. 6 (10th Cir.1989). 2 But such waiver must be narrowly construed, id., and whatever narrow jurisdiction may lie under Sec. 2410 does not extend to an omnibus challenge to the authority of the Internal Revenue Service to function. See generally United States v. Morrison, 247 F.2d 285, 290 (5th Cir.1957) (the primary application of Section 2410(a)(1) is to allow joinder of the Government to settle "the traditional controversy in which a private party asserts an ownership which is superior to the claimed lien of the United States Government."); Quinn v. Hook, 231 F.Supp. at 720 ("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.").

The Lonsdales' argument concerning the regularity of the levies must be tested under the judicial exception to the Anti-Injunction Act referred to above, relating to cases where it is clear that under no circumstance could the government ultimately prevail. For practical purposes, the Lonsdales would face the same burden with respect to these purely legal questions if jurisdiction was founded on Sec. 2410 rather than on the judicial exception to the Anti-Injunction Act, but here they must also show irreparable injury. In any event, for the reasons set forth below, we reject the Lonsdales' delegation of authority and Paperwork Reduction Act claims as a matter of law. It follows that the exception to the Anti-Injunction Act cannot apply to avoid the jurisdictional bar here.

Finally, the Lonsdales cite numerous other statutes in their complaint as conferring jurisdiction--28 U.S.C. Secs. 1331, 1340, 1361, 2463; 5 U.S.C. Secs. 301, 556(d), 558, 559, 701-706; 26 U.S.C. Secs. 7214(a)(1), (2) and (7) (R.Vol. I, Tab 1 at 3). None of those statutes waive the government's sovereign immunity here. Sovereign immunity is not waived by general jurisdictional statutes such as 28 U.S.C. Sec. 1331 (federal question jurisdiction), 28 U.S.C. Sec. 1340 (jurisdiction over actions arising under the Internal Revenue Code), and 28 U.S.C. Sec. 1361 (action to compel a government officer to perform his duty). See Coggeshall Development Corp. v. Diamond, 884 F.2d 1, 3-4 (1st Cir.1989); Estate of Watson v. Blumenthal, 586 F.2d 925, 932 (2d Cir.1978); Carelli v. Internal Revenue Service, 668 F.2d 902, 904 (6th Cir.1982). Rather, the taxpayer must find an explicit waiver of sovereign immunity. Section 2463 of Title 28, which provides that property taken or detained under any federal revenue law shall be subject only to the orders of the courts of the United States having jurisdiction thereof, similarly does not constitute the necessary explicit waiver of sovereign immunity. See Nehf v. United States, 302 F.Supp. 356, 359 (N.D.Ill.1969). Furthermore, Sec. 2463 was not intended to confer jurisdiction on the federal district courts over property levied upon and seized under the Internal...

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