Rutherford v. U.S., 81-1548

• Decision Date: 11 April 1983
• Docket Number: No. 81-1548,81-1548
• Citation: 702 F.2d 580
• Parties: 83-1 USTC P 9289 Daniel R. RUTHERFORD and Linda D. Rutherford, Plaintiffs-Appellants, v. UNITED STATES of America, District Director of the Internal Revenue Service and Marvin Kuntz, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 580

702 F.2d 580

83-1 USTC P 9289

Daniel R. RUTHERFORD and Linda D. Rutherford, Plaintiffs-Appellants, v. UNITED STATES of America, District Director of the Internal Revenue Service and Marvin Kuntz, Defendants-Appellees.

No. 81-1548.

United States Court of Appeals Fifth Circuit.

April 11, 1983.

Daniel R. Rutherford, pro se.

John F. Murray, Acting Asst. Atty. Gen., Michael L. Paup, Chief, Appellate Sec., Robert A. Bernstein, Kenneth L. Greene, Wynette J. Hewett, Attys., Tax Div., Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Western District of Texas.

Before THORNBERRY, JOHNSON and HIGGINBOTHAM, Circuit Judges.

JOHNSON, Circuit Judge:

Taxpayers Daniel and Linda Rutherford claim that Internal Revenue Service Agent Marvin Kuntz violated their constitutional right to due process by willfully and maliciously assessing them for taxes they did not owe, harassing them into paying those taxes, and forcing them to sue for a refund. The district court 528 F.Supp. 167 granted judgment for Kuntz on the theory that established avenues for recovery of over-assessments from the Government satisfy the Rutherfords' due process interests. We reverse. The administrative and judicial refund proceedings available to the Rutherfords are not designed to, and do not, protect the range of interests they fairly may be understood to assert.

I.

Since the complaint was dismissed for failure to state a claim upon which relief can be granted, ¹ we will present the facts as the plaintiffs claim them to be in their pleadings. Cruz v. Beto, 405 U.S. 319, 92 S.Ct. 1079, 1082, 31 L.Ed.2d 263 (1972); Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Rathborne v. Rathborne, 683 F.2d 914, 918 n. 14 (5th Cir.1982).

The Rutherfords say their problems started in the spring of 1974, when IRS Agent Marvin Kuntz began an audit of their 1971, 1972, and 1973 tax returns. Over the next eighteen months, Kuntz harassed the Rutherfords with unjustified tax assessments and abusive displays of authority. He invented additional gross income of $5943.83 for the year 1971 and $83,000 for the year 1973; he intentionally assessed them twice on the same income by adding $8215.75 which had been reported and taxed in 1974 to their 1973 receipts, while refusing to make a compensating adjustment to their 1974 return. He made repeated demands for useless documentation, charged them with hiding money, and once insisted that Daniel Rutherford empty his pockets of money and let him count it. He told Daniel Rutherford "You don't think I am going to spend this much time on this audit and not come up with a considerable sum of money due and owing." And in the coup de grace, he arranged for his audit report to be delivered to the Rutherfords' home at 4:30 p.m. on Christmas Eve 1974. His abusive conduct caused the Rutherfords severe mental anguish; in Daniel's case, it was disabling, and he sought medical attention.

The adverse audit report eventually resulted in a deficiency assessment of $30,958.40. Over the next few years, the Rutherfords retained a number of tax advisors and engaged in a series of administrative proceedings and negotiations with the Government, but their conciliatory efforts were unsuccessful. In 1978, the Government liquidated part of its claim against them by applying their current tax payments to the disputed assessment. Two years later, the Rutherfords initiated an action in the district court for recovery of those monies applied in partial payment. The Government resisted, arguing that the district court was without jurisdiction over the refund suit because the entire assessment had not been paid; the plaintiffs, in an attempt to set the jurisdictional issue aright, filed an amended complaint stating that three days after filing the original complaint they had satisfied the jurisdictional prerequisites by paying the balance of $27,356.31 owing on the assessments.

It was at this point that the Rutherfords' claim against Agent Kuntz first surfaced. Count II of the amended complaint cast the Rutherfords' tale of the Agent's malfeasance as a willful and malicious violation of their fourteenth amendment rights; in recompense, the plaintiffs demanded compensatory damages for mental anguish and for the legal fees incurred in resisting the Government's claim, and punitive damages in retribution for Kuntz' abuses of authority.

In due course, the district court dismissed the refund claim for want of jurisdiction at the time the action was filed, Flora v. United States, 357 U.S. 63, 78 S.Ct. 1079, 2 L.Ed.2d 1165 (1958), aff'd on rehearing, 362 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960); Gresham Park Community Organization v. Howell, 652 F.2d 1227, 1236-37 n. 25 (5th Cir.1981), and the constitutional claim against Agent Kuntz for failure to state a claim on which relief can be granted, see ante note 1. The plaintiffs do not appeal the jurisdictional dismissal of their refund action. ² What they do challenge is the decision that they failed to state a legally cognizable complaint against Agent Kuntz. Resolution of their appeal requires a careful examination of the reasoning behind that judgment.

The district court construed the Rutherfords' invocation of the fourteenth amendment as an attempt to allege a Bivens action ³ under the fifth amendment. ⁴ It interpreted their story of Kuntz' abusive behavior as a complaint that they were forced to pay taxes not due and owing; placing primary emphasis on a taxpayers' interest in recovering monies wrongfully assessed and unnecessarily paid, the court concluded that, "the only source [it could] find [ ] for the plaintiffs' claim against Kuntz is in the Fifth Amendment's proscription against any person's being 'deprived of ... property, without due process of law,' " (emphasis added). The district court's construction of the plaintiffs' allegations as a statement of a property interest guided its inquiry into the constitutional adequacy of procedural protections afforded them. It observed that post-deprivation process existed in the form of available administrative and judicial proceedings for recovery of taxes over-assessed, 26 U.S.C. Sec. 7422; 28 U.S.C. Sec. 1346(a)(1); and that these remedies had been held constitutionally adequate, Phillips v. Commissioner, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289 (1931); Nash Miami Motors, Inc. v. Commissioner, 358 F.2d 636 (5th Cir.), cert. denied, 385 U.S. 918, 87 S.Ct. 227, 17 L.Ed.2d 142 (1966). Invoking the rationale of Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1982), it held that in light of the constitutional sufficiency of these post-deprivation remedies, the plaintiffs had failed to establish that their deprivation of property was "without due process of law." It dismissed the claim on the ground that no constitutional tort had been stated.

The plaintiffs appeal its decision on the single, narrow ground that due process has not been accorded, because the available actions for recovery of taxes over-assessed are not responsive to their claims of harassment by the tax collector.

II.

Parratt held that existing state tort remedies for negligent, episodic deprivations of property by state officials can satisfy the federal constitutional guarantee of procedural due process, Parratt, 101 S.Ct. at 1917; Duncan v. Poythress, 657 F.2d 691, 704-05 (5th Cir.1981), cert. denied, --- U.S. ----, 103 S.Ct. 252, 74 L.Ed.2d 197 (1982). But a critical prerequisite to a determination under Parratt that existing post-deprivation remedies are sufficient to satisfy the requirements of due process is an ascertainment of congruity between the substantive interests asserted by the plaintiff and the interests protected by the existing remedial scheme. Remedies not responsive to the range of intangible interests claimed to be injured are not meaningful in an analysis of the adequacy of process provided. The Supreme Court, 1981 Term, 96 Harv.L.Rev. 61, 103 n. 45 (Nov. 1982). Parratt recognized this: a state prisoner charged the prison mail room had negligently lost his hobby kit; the state provided an action for tortious losses at the hands of the state. The Court declared that because "[t]he remedies provided could have fully compensated the respondent for the property loss he suffered ... they [were] sufficient to satisfy the requirements of due process." Parratt, 101 S.Ct. at 1917. ⁵

The importance of congruity between the interests at issue and the remedies available was re-emphasized in Logan v. Zimmerman Brush Co., 455 U.S. 422, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982). Logan concerned a discharged, handicapped employee's loss of his right to pursue a claim of discriminatory termination. The Court held that the independent tort action available under state law was a constitutionally unsatisfactory substitute for his cause of action under the state Fair Employment Practices Act: because reinstatement was not a remedy available through the tort action, "even if successful [would] not vindicate entirely Logan's right to be free from discriminatory treatment," Logan, 102 S.Ct. at 1158. Parratt and Logan make clear that a proper application of their principles demands analysis of the adequacy of the available process to remedy the essential aspects of the interests at stake. Accord, Engblom v. Carey, 677 F.2d 957, 965 (2d Cir.1982). It is at this juncture that our analysis diverges from that of the district court.

We view the Rutherfords' factual allegations from a different legal perspective than did the district court. That Court thought that the heart of the Rutherfords' complaint laid in their allegation that their taxes had been over-assessed, and characterized their claim as the pursuit of a property interest. We believe that a fair reading of their charges against Agent Kuntz discloses an attempt to lay claim not to a property interest, but to a liberty...