Matter of Washington
| Decision Date | 13 May 1994 |
| Docket Number | Adv. No. 93-4014. |
| Parties | In the Matter of Gail K. WASHINGTON (Chapter 13 Case 92-40489), Debtor. Gail K. WASHINGTON, Plaintiff, v. INTERNAL REVENUE SERVICE and United States of America, Defendants. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Georgia |
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Wade Gastin, Savannah, GA, for plaintiff.
James B. Thompson, Jr., Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, for defendants.
The trial of the above case was held on February 2, 1994. After consideration of the evidence and applicable authorities I make the following Findings of Fact and Conclusions of Law.
Debtor's Chapter 13 case was filed March 9, 1992. Debtor properly scheduled the Internal Revenue Service ("IRS") as a creditor in her case, and on March 10, 1992, the IRS received notice of the pendency of her case pursuant to notice issued by the Clerk of this Court. The IRS timely filed a proof of claim in Debtor's case indicating that it held an unsecured claim in the amount of $6,419.11. On July 29, 1992, Debtor's Chapter 13 Plan was confirmed.
Debtor's obligation to the IRS stems from a 1987 tax obligation on which she was jointly liable with her former husband, Mr. Verdell Washington, as well as an individual obligation from the 1991 tax year. Mr. Washington died in December of 1987, and Debtor has since filed her tax returns as a single taxpayer. On January 9, 1993, the IRS issued a notice of levy upon Debtor's employer, Southern Intermodal Logistics, a trucking firm where Debtor worked as a driver. The notice indicated that the IRS was placing a levy on Debtor's wages. Debtor received word of the levy through the dispatcher on duty at Southern Intermodal Logistics. Debtor testified that she was extremely embarrassed and upset when the dispatcher told her of the levy.
Upon learning of the levy, Debtor contacted her attorney, Wade Gastin, and he petitioned this Court ex parte for issuance of a stop levy order. On January 14, 1993, such an order was issued by the undersigned. Pursuant to that order, a release of Debtor's wages was executed by the bankruptcy unit of the IRS on February 9, 1993. As a result, the levy did not deprive Debtor of any of her wages.
Debtor alleges that the IRS' actions in levying upon her wages was a willful violation of the automatic stay under section 362(h) of the Bankruptcy Code. Accordingly, Debtor seeks, as damages under section 362(h), lost wages, in the total amount of $350.00, for three days of work that she was forced to miss when she was meeting with her attorney and appearing in court for the trial of this matter. Debtor also claims that her employer began to treat her differently after the levy, and as a result, she felt compelled to find other employment. Debtor did not, however, present any evidence which supports a finding that she had additional lost wages as a result of any actions by her employer. Finally, Debtor seeks compensation for attorney's fees, as well as an award of punitive damages against the IRS.
The United States raises a number of defenses, including a lack of personal jurisdiction and sovereign immunity. It further asserts that it did not willfully violate the automatic stay, and that Debtor has not proven any of the damages alleged. In support of these defenses, the United States called as its witness Ms. Sams-Weems, a revenue officer with the IRS. Ms. Sams-Weems, relying upon IRS computer records, testified that the bankruptcy unit received notice of the Debtor's filing in April of 1992, that the Service filed a claim in Debtor's case in June of 1992 and that a "bankruptcy hold" was placed on Debtor's tax file to prevent any post-petition collection activity. Ms. Sams-Weems then testified as to how the post-petition levy on Debtor's wages came about. She first explained that, when dealing with a tax obligation on which a husband and wife are jointly liable, the Service's current collection system is keyed exclusively to the name and Social Security number of the spouse who appears first on the joint return. As a result, if the spouse, whose name and Social Security number appear first on the joint return, does not file a bankruptcy, the collection unit of the IRS does not put a "bankruptcy hold" on the collection file for that particular obligation. In other words, when, as in this case, the spouse not appearing first on the joint return, is the only party filing bankruptcy, the Service's current system is incapable of transmitting any information regarding the spouse's bankruptcy to the collection file for the joint tax obligation.
Ms. Sams-Weems went on to explain that, in response to some post-petition collection activity, a debtor will typically notify the IRS that he or she has filed a bankruptcy case, and at that point, the Service will immediately respond by verifying the information, releasing all levys and manually entering the information in their records so as to suspend further collection activity. This is accomplished, according to Ms. Sams-Weems, by adding the information concerning the bankruptcy debtor coded to her Social Security number to the Internal Revenue Service collection file under the name of the primary taxpayer. Under the IRS' current system, then, it is virtually certain that the IRS will not get the bankruptcy information of a taxpayer, whose name does not appear at the top of a joint return, into the collection file for that joint tax obligation until the IRS has initiated post-petition collection activities against the taxpayer.
This case presents three basic issues. The first is whether the IRS "willfully violated" the automatic stay under section 362(h) of the Bankruptcy Code when it attempted to collect on a pre-petition tax obligation by levying upon Debtor's wages post-petition. The second issue is whether the United States of America, as the true party in interest in this case, has waived its sovereign immunity under section 106 of the Code as to any damages which are properly awarded under section 362(h). The final issue is whether Plaintiff has proven any damages under section 362(h).
Section 362(a) of the Bankruptcy Code imposes an "automatic stay" upon the filing of a petition in bankruptcy, which prohibits, among other things, any act to obtain possession of estate property or to collect, assess, or recover a claim against a debtor that arose before the commencement of the debtor's bankruptcy case. 11 U.S.C. §§ 362(a)(3) and (a)(6).1 "The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws,"2 and section 362(h) was added to the Bankruptcy Code to provide courts with an enforcement mechanism to protect a debtor from creditors who willfully violate the stay. See In re Solis, 137 B.R. 121, 124 (Bankr.S.D.N.Y.1992). In this regard, section 326(h) provides:
An individual injured by any willful violation of a stay provided by § 362(a) shall recover actual damages, including costs and attorneys\' fees, and, in appropriate circumstances, may recover punitive damages.
11 U.S.C. § 362(h).
The requirement that a stay violation be "willful" does not mean that an entity must act with the specific intention of violating the stay. To the contrary, this court has previously held that "willful", as the term is used in section 362(h), is satisfied when an entity engages in a deliberate act that is done in violation of the automatic stay with knowledge that the debtor has filed a petition in bankruptcy. See McDougald v. Internal Revenue Service (Matter of McDougald), Adv. No. 90-4177, 1991 WL 635259, slip op. at 12 (Bankr.S.D.Ga. April 24, 1991)3 "Where there is actual notice of the bankruptcy it must be presumed that the violation was deliberate or intentional." Homer Nat'l Bank v. Namie, 96 B.R. 652, 654 (W.D.La. 1989).
The IRS does not dispute that it is subject to the automatic stay imposed under 11 U.S.C. § 362(a). Nor does it dispute that, after receiving notice of Debtor's Chapter 13 bankruptcy, it violated the automatic stay by effecting a post-petition levy upon Debtor's wages. I therefore conclude that the IRS' actions in sending a notice of levy to Debtor's employer constituted a willful violation of the automatic stay under section 362(h) of the Code.
Debtor has named both the IRS and the United States of America as Defendants in this action. The IRS is a bureau within the Department of the Treasury of the United States of America, and it is not authorized to sue or be sued in its own right.4 The United States of America, therefore, is the only party properly named as a Defendant in this case. Accordingly, the Internal Revenue Service is dismissed as a Defendant in this action.5
The doctrine of sovereign immunity bars all lawsuits against the United States of America unless Congress has provided an express and unequivocal waiver of such immunity. Block v. North Dakota, 461 U.S. 273, 280, 103 S.Ct. 1811, 1816, 75 L.Ed.2d 840 (1983); U.S. v. Nordic Village, Inc., ___ U.S. ___, ___ - ___, 112 S.Ct. 1011, 1014-15, 117 L.Ed.2d 181 (1992); U.S. v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607, 613 (1980); U.S. v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1503, 23 L.Ed.2d 52, 56 (1969). Moreover, any waiver of immunity "must be construed strictly in favor of the sovereign, and not enlarged beyond what the language requires." U.S. v. Nordic Village, Inc., ___ U.S. at ___, 112 S.Ct. at 1015 (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 3278, 77 L.Ed.2d 938 (1983)). Congress provided for a limited waiver of sovereign immunity in section 106 of the Bankruptcy Code, which provides:
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