Scott v. US

• Decision Date: 19 November 1993
• Docket Number: No. 92-00011.,92-00011.
• Citation: 847 F. Supp. 1499
• Parties: Nicholas T. SCOTT, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Hawaii

847 F. Supp. 1499

Nicholas T. SCOTT, Plaintiff, v. UNITED STATES of America, Defendant.

No. 92-00011.

United States District Court, D. Hawaii.

November 19, 1993.

Nicholas T. Scott, pro se.

Daniel Bent, Michael Chun, Asst., U.S. Attys. Office, Honolulu, HI, Thomas Moore, U.S. Dept. of Justice, Washington, DC, for USA and IRS, Director.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

KAY, Chief Judge.

THIS MATTER came before the Court for trial on October 5, 1993 through October 7, 1993. Having considered the testimony and other evidence presented, the Court enters its findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

BACKGROUND

Plaintiff Nicholas T. Scott ("Scott") brought this action to recover an overpayment of federal income taxes for 1984. On November 28, 1989, by filing a tax return for the 1984 taxable year, Scott made his refund claim to the Internal Revenue Service ("IRS"). The IRS refused Scott's refund claim, asserting that the statute of limitations for filing it had expired. Scott contends that equitable tolling principles prevent his refund claim from being time-barred. He specifically argues that from the time his 1984 tax return was due to the time he actually filed that return, he suffered from severe alcoholism, which caused him to be mentally incompetent and incapable of filing a tax return. Thus, the central issues in this case are whether Scott was incompetent from the time his 1984 tax return was due to the time he actually filed that return, and, if so, whether his incompetency tolls the statute of limitations.

As an initial matter, this Court holds that any finding of fact which may be deemed, in whole or in part, more properly a conclusion of law shall be deemed as such, and any conclusion of law which may be deemed, in whole or in part, more properly a finding of fact shall be deemed as such.

FINDINGS OF FACT

A. Scott's Refund Claim

1. This is a federal income tax refund suit involving an overpayment of taxes by Scott for the calendar year 1984.

2. In 1984, after Scott received an inheritance, he invested that money in a partnership known as "Wine Horizons," a business which operated a retail wine store in Danville, California.

3. Prior to that time, around 1980, Scott gave a power of attorney to his father, Gene Scott. Gene Scott demanded the power of attorney when he learned that Scott had failed to file and pay federal income tax for previous years.

4. During 1984, in accordance with the terms of the power of attorney, Gene Scott made federal tax deposits on Scott's behalf. In December 1984 or January 1985, Gene Scott revoked the power of attorney by tearing it up. At the time he tore up the power of attorney, Gene Scott insisted that Scott make his last estimated tax payment for 1984, which was due in January 1985. Scott made the final payment in a timely fashion.

5. Scott paid a total of $30,096.00 to the IRS for application to his 1984 federal income taxes.

6. Scott had no tax liability for 1984.

7. Scott's 1984 tax return was due on April 15, 1985.

8. Scott filed a tax return for the 1984 taxable year on November 29, 1989. Through that tax return, Scott sought a refund of the $30,096.00, plus interest.

9. The IRS denied the claim for refund, maintaining that the statute of limitations for filing a refund claim had expired. The United States cites the applicable statute of limitations as 28 U.S.C. § 6511.

10. On January 8, 1992, shortly after the IRS denied his claim, Scott filed this action to recover the overpayment of the $30,096.00, plus interest. Scott asserts that his refund claim is not time-barred under equitable tolling principles because, from the time his 1984 tax return was due to the time he actually filed that return, he was mentally incompetent as a result of his alcoholism.

B. Scott's Alcoholism

11. From the early 1980's through at least early November 1989, Scott was a severe alcoholic. Scott presented testimony from several witnesses chronicling his alcoholism. The evidence of Scott's alcoholism is overwhelming. Below are examples of this evidence:

(a) In the early 1980's, Scott began drinking large quantities of alcohol. Scott drank so heavily that he began to suffer from blackouts on a nearly daily basis, particularly in 1986 and 1987. Also because of his heavy drinking, Scott's father held a power of attorney for him from around 1980 to January 1985.

(b) Scott's heavy drinking caused him to be suspended from the California bar for failure to pay his bar dues.

(c) Scott's heavy drinking resulted in several failed relationships with women.

(d) In 1980, Scott was in a car accident because of his drinking.

(e) In 1981, Scott lost a job as an attorney because of his drinking.

(f) From 1982 through 1986, Scott received five citations from the State of California for driving under the influence of alcohol (DUI). The dates of the DUI violations include: (1) October 22, 1982; (2) July 15, 1986; (3) July 18, 1986; (4) August 14, 1987; and (5) January 2, 1988.

(g) From 1984 to July 1987, the entire time Scott operated Wine Horizons, Scott spent most of his time buying wine for the store, engaging in wine tasting sessions with his customers, and drinking wine and vodka. Because wine was not always strong enough for Scott, Scott would fill a glass full of vodka and then add a few drops of wine to make the vodka appear to be wine.

(h) Also during the entire time Scott operated Wine Horizons, Scott paid no attention to bills or operation of the books. These matters were handled by others. Moreover, all partnership documents, sales tax returns, and other documents were prepared by others.

(i) In 1985, Scott's long-time girlfriend was killed in a car accident, causing Scott to become very depressed and to increase his alcohol intake to even greater levels.

(j) In 1985, Scott's heavy drinking caused his partner in Wine Horizons to walk out on him. Even at the time the partnership agreement was entered into in 1984, Scott and his partner added an addendum to the agreement addressing the partner's concern over Scott's potential incapacity due to alcohol abuse.

(k) In January 1987, due to his alcoholic state, Scott failed to pay the rent for his wine store, Wine Horizons. As a result, he entered into a stipulation with his landlord in which Scott agreed to pay the rent owed on a certain time frame, and, if he failed to do so, Scott's landlord was empowered to file an ex parte application which would allow the landlord to obtain a writ of execution on the entire inventory of Wine Horizons. This stipulation was filed in the Superior Court of the State of California, County of Contra Costa on February 9, 1987. Judgment was entered on the stipulation on June 3, 1987.

(l) In February 1987, Scott's landlord insisted that David Green, an employee of Scott, run the wine shop's operations because, due to Scott's alcohol abuse, the landlord had little confidence in Scott's competence to run it.

(m) Scott failed to pay the rent as specified in the February 1987 stipulation with his landlord, and, on July 2, 1988, Scott received a notice of default. The notice informed Scott that the writ of execution on Wine Horizons' inventory would be executed on July 10, 1987 if Scott did not pay the rent owed.

(n) Scott kept his personal collection of wines, worth about $30,000.00, at Wine Horizons. His personal collection was not part of Wine Horizons' inventory. Even though Scott knew that his personal collection would be seized with Wine Horizons' inventory if he did not remove it from the store, Scott did nothing to protect his personal collection because his alcoholic state made him apathetic and uncaring about anything but his next drink. Scott ignored the pleas of friends urging him to protect his personal collection of wine.

(o) When the writ of execution was executed on July 10, 1987, Scott simply remained in the store, drinking, as the sheriff took away the inventory.

(p) With regards to the August 14, 1987 DUI violation, Scott was sentenced to 30 days in prison and 10 days at DUI school. Any person showing up to the DUI school while intoxicated would be thrown out of the school. Scott was thrown out of the school because he showed up with alcohol on his breath. Scott served the 30 days of prison starting sometime in mid-August 1987 through sometime in mid-September 1987.

(q) After Scott was released from prison in mid-September 1987, he attended the public sale of Wine Horizons' inventory. Scott believed the wine was being sold to his landlord's attorney through a strawman and believed this to be illegal. Nevertheless, Scott's alcoholic state prevented him from objecting to the sale.

(r) Sometime after the public sale of Wine Horizons' inventory, Scott was evicted from the building in which Wine Horizons had operated. When he was evicted, Scott did not even attempt to safeguard or rescue his business records.

(s) For Scott's fourth and fifth DUI violations, Scott was incarcerated from about November 23, 1987 to September 1, 1988. When incarcerated during this period, Scott was a member of an alcoholic rehabilitation program at prison, known as the Deuce Program. As part of this program, Scott was allowed supervised releases from prison, normally for 48 hours every two weeks. On January 2, 1988, the date of Scott's fifth DUI violation, Scott had been released from prison on the order of a California state judge so that he could help his girlfriend move into a new apartment. Despite the fact that Scott obtained an additional DUI while on release, Scott was not removed from the Deuce Program, and, was still allowed releases from prison. During Scott's 48-hour releases from prison, Scott would drink continuously.

(t) As soon as Scott was released from prison in September 1988, Scott immediately became intoxicated.

(u) Several days after his release from prison, Scott's sister urged him to pay his federal income taxes. At her

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