MacElvain v. US

• Decision Date: 23 August 1994
• Docket Number: Civ. A. No. 93-T-542-N.
• Citation: 867 F. Supp. 996
• Parties: Robert C. MacELVAIN, Plaintiff, v. UNITED STATES of America and Mohammed Ali Shah, Defendants.
• Court: U.S. District Court — Middle District of Alabama

867 F. Supp. 996

Robert C. MacELVAIN, Plaintiff, v. UNITED STATES of America and Mohammed Ali Shah, Defendants.

Civ. A. No. 93-T-542-N.

United States District Court, M.D. Alabama, Northern Division.

August 23, 1994.

COPYRIGHT MATERIAL OMITTED

Richard L. Pyper, Thorington & Gregory, Montgomery, AL, Julian L. McPhillips, Jr., Kenneth Jay Shinbaum, McPhillips, Shinbaum & Gill, Montgomery, AL, David G. Chiodo, David G. Chiodo & Associates, P.C., Atlanta, GA, for Robert C. MacElvain.

Kenneth E. Vines, Redding Pitt, U.S. Attys., U.S. Attys. Office, Montgomery, AL, Carol Koehler Ide, U.S. Dept. of Justice, Tax Div., Washington, DC, for U.S.

Kenneth L. Millwood, Kevin H. Hudson, B. Shane Clanton, Nelson, Mullins, Riley & Scarborough, Atlanta, GA, for Mohammed Ali Shah.

MEMORANDUM OPINION

MYRON H. THOMPSON, Chief Judge.

Plaintiff Robert C. MacElvain has brought this lawsuit against defendants United States of America and Mohammed Ali Shah, claiming: first, that he is entitled to have the sale of property seized from him in 1993 set aside because the Internal Revenue Service ("IRS") failed to follow proper procedures; and, second, that the IRS should be enjoined from further efforts to assess and collect unpaid taxes for the years 1980 to 1986 because the IRS did not adhere to the correct procedures for making assessments and did not make such assessments within the time period allowed by statute. This action is now before the court on motions to dismiss filed by both the government and Mohammed Ali Shah. For the reasons that follow, the motions will be granted on the ground that the court lacks jurisdiction to grant the relief MacElvain seeks.

I. BACKGROUND

The IRS has determined that, for the years 1980 to 1986, MacElvain is liable for unpaid federal income taxes, interest, and statutory additions in excess of $2,036,835. The IRS has made various attempts to collect these unpaid taxes. It mailed notices and demands for payments to MacElvain, and it informed him that his property might be subject to seizure. After these collection efforts proved futile, the IRS obtained a writ of seizure against his and his wife's property. It then seized several assets, including MacElvain's stock interest in Fulton Ferracute Industries International, Inc. The IRS determined that the stock interest was in danger of perishing or becoming greatly reduced in value and needed to be sold immediately. It therefore sold the stock interest to a Pakistani national, Mohammed Ali Shah, at a public auction.

In his complaint filed in April 1993 against the United States of America and Mohammed Ali Shah, MacElvain challenged the sale of his stock interest on the ground that the IRS did not provide adequate notice of the sale. He asked that the court set aside the sale and enjoin further efforts at collection by the IRS. MacElvain later amended his complaint to challenge the validity of the tax assessments made against him between 1980 and 1986. He contends that the IRS did not properly follow the procedures for making tax assessments and failed to impose the deficiencies within the time allowed by the statute of limitations. With the amended complaint, MacElvain added a request for injunctive relief requiring the IRS to withdraw all liens filed against his property and to cease its efforts to file future liens.

The government contends that MacElvain's lawsuit should be dismissed because the court has no subject-matter jurisdiction over his claims. Ali Shah also moves for dismissal on several grounds, including lack of subject-matter jurisdiction.

II. THE GOVERNMENT'S MOTION TO DISMISS

MacElvain seeks several forms of injunctive relief. He asks that the government be required to set aside the sale of his stock interest in Fulton Ferracute Industries. He also asks that the IRS be directed to withdraw all liens filed on his property and to "cease and desist levying against any and all bank accounts, investment accounts, retirement benefits and any and all other tangible and intangible property owned by him."¹ It appears that there are two possible jurisdictional bases for the relief he seeks in this case: first, a judicially created exception to the Anti-Injunction Act, 26 U.S.C.A. § 7421(a); and, second, 28 U.S.C.A. § 2410(a), which authorizes a taxpayer to sue the United States to determine title. Each of these possible sources of jurisdiction will be considered in turn.

A. Exceptions to the Anti-Injunction Act

Under the Anti-Injunction Act, district courts have only limited power to grant equitable relief to litigants who challenge the government's tax collection powers. Section 7421(a) provides that:

"Except as provided in sections 6212(a) and (c), 6213(a), 6672(b), 6694(c), 7426(a) and (b)(1), and 7429(b), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed."

None of the exceptions applies in this case. Sections 6212 and 6213 both apply only when taxpayers appeal a notice of deficiency to the United States Tax Court; § 6672(b) applies to bonds filed within 30 days of the assessment to ensure collection; § 6694 applies to penalty proceedings against return preparers; § 7426 addresses third-party wrongful levy suits; and § 7429 applies to proceedings brought to review jeopardy assessments.

There is, however, one additional exception to § 7421(a). The Supreme Court has carved out an exception for cases in which (1) there are no circumstances under which the government could prevail on the merits and (2) where the plaintiff has no adequate remedy at law and might face an irreparable injury. Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962). In determining whether there is a chance the government could prevail on the merits, the court must decide that, "under the most liberal view of the law and the facts, the United States cannot establish its claim," id.; the government's claim must be "without foundation." Id. at 8, 82 S.Ct. at 1129.

MacElvain has not established that he is entitled to this exception. The certificates of assessment and payment entered against a taxpayer are treated as presumptively valid evidence that the assessments are correct and that they were prepared in accordance with IRS procedures. United States v. Chila, 871 F.2d 1015, 1017-18 (11th Cir.), cert. denied, 493 U.S. 975, 110 S.Ct. 498, 107 L.Ed.2d 501 (1989). MacElvain has offered no evidence to rebut this presumption of correctness. He never identifies with any degree of specificity or detail the procedural defects to which he refers in his complaint. In addition, MacElvain's contention that his tax liabilities were not assessed within the time period allowed by the statute of limitations also appears to be without merit. The statute of limitations is tolled "in the case of a false or fraudulent return," or in the event of "a willful attempt ... to defeat or evade tax liabilities." 26 U.S.C.A. § 6501(c)(1) & (2). Because the tax liabilities MacElvain listed on his tax returns were substantially less than those determined by the IRS, the government has a more than colorable case that MacElvain engaged in intentional fraud, which would toll the running of the statute of limitations.² The court therefore cannot conclude, as required in Enochs, that there are no circumstances under which the government could prevail on the merits against MacElvain.

Finally, as to the claim that was at the heart of MacElvain's original complaint — that he was not given adequate notice of the sale of his stock interest — again he is unable to show, as required in Enochs, that there are no circumstances under which the government could prevail on the merits. 26 U.S.C.A. § 6336 provides:

"If the Secretary determines that any property seized is liable to perish or become greatly reduced in price or value by keeping, or that such property cannot be kept without great expense, he shall appraise the value of such property and —

(1) Return to owner. — If the owner of the property can be readily found, the Secretary shall give him notice of such determination of the appraised value of the property. The property shall be returned to the owner if, within such time as may be specified in the notice, the owner —

(A) Pays to the Secretary an amount equal to the appraised value, or

(B) Gives bond in such form, with such sureties, and in such amount as the Secretary shall prescribe, to pay the appraised amount at such time as the Secretary determines to be appropriate in the circumstances.

(2) Immediate sale. — If the owner does not pay such amount or furnish such bond in accordance with this section, the Secretary shall as soon as practicable make public sale of the property in accordance with such regulations as may be prescribed by the Secretary."³

The evidence reflects that, after the IRS determined that the stock interest in Fulton Ferracute Industries was in danger of becoming either perishable or greatly reduced in value, an effort was made to notify MacElvain. On February 17, 1993, the IRS orally notified a representative of MacElvain's that, because of its diminishing value, the stock would be sold in two days. On February 18, notice of the sale was delivered in writing to MacElvain's home, and notice was also posted in five public locations. On February 19, MacElvain's wife acknowledged receipt of the notice, but she advised an IRS representative that her husband was unavailable.

In response, MacElvain contends that the IRS did not have a sufficient basis for its conclusion that his stock interest was declining in value; moreover, he suggests that the IRS failed to comply with the expedited notice procedures. According to MacElvain, he never personally received advance notice of the sale either orally or in writing. Without deciding whether the IRS's efforts at notice were...