U.S. v. Asmar

• Decision Date: 27 August 1987
• Docket Number: No. 86-5585,86-5585
• Citation: 827 F.2d 907
• Parties: -5525, 87-2 USTC P 9488 UNITED STATES of America, Appellant, v. Robert ASMAR and Kathleen Asmar.
• Court: U.S. Court of Appeals — Third Circuit

Page 907

827 F.2d 907

60 A.F.T.R.2d 87-5525, 87-2 USTC P 9488

UNITED STATES of America, Appellant, v. Robert ASMAR and Kathleen Asmar.

No. 86-5585.

United States Court of Appeals Third Circuit.

Argued May 20, 1987.

Decided Aug. 27, 1987.

Roger M. Olsen, Asst. Atty. Gen., Michael L. Paup, Chief, Appellate Section, Richard J. Driscoll (Argued), Richard Farber, U.S. Dept. of Justice, Tax Div., Washington, D.C., for appellant; Thomas W. Greelish, U.S. Atty., of counsel.

Richard L. Friedman (Argued), Sharlene A. Hunt, Giordano, Halleran & Ciesla, Middletown, N.J., for appellee Kathleen Asmar.

Before SLOVITER, BECKER and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

This appeal arises from a civil action brought by the IRS against Robert and Kathleen Asmar seeking judgment for income tax deficiencies, penalties and interest for the years 1965-1968. Kathleen Asmar Rosenbaum (Asmar), among other defenses, asserts that the IRS was estopped to obtain judgment against her.

The acts that Asmar claims constitute estoppel are a series of representations made to her by low-level Internal Revenue Service employees. Asmar asserts that it was represented to her that the IRS would not take action against her to collect an adjudicated tax liability, but rather, that the IRS would seek payment from her former husband and joint obligor, Robert Asmar. The district court ruled in Ms. Asmar's favor. We reverse.

I.

Married in 1957, Kathleen and Robert Asmar separated in 1973, and obtained a divorce decree in November of 1977. In 1976, the Tax Court held that the Asmars were jointly and severally liable for substantial tax deficiencies for the tax years 1965 through 1968. See Asmar v. Commissioner, 35 T.C.M. (CCH) 930 (1976). The Tax Court held Kathleen Asmar was not entitled to an innocent spouse exemption from tax liability. In addition, the Tax Court, holding that Robert Asmar committed fraud by underreporting his tax liability, assessed fraud penalties against Robert individually. The outstanding joint tax liability, including interest, totalled $60,867.31 in November 1982. Robert Asmar's individual liability for the assessed fraud penalties stood at $22,749.31 at the same point in time. At oral argument before this court, it was estimated that the current outstanding joint tax liability was approximately $100,000.

Following the 1976 tax adjudication, the IRS began efforts to collect the joint tax liabilities of the Asmars and the individual liability of Robert Asmar. Kathleen Asmar was notified on November 10, 1976 that assessments were being made against both her and her estranged husband. The IRS demanded payment from Robert Asmar in January 1977, and he responded that he was unable to pay. In February 1977, the IRS demanded payment from Kathleen Asmar, who also responded that she was unable to pay. In January and March 1977, both Kathleen and Robert received notice of the imposition of federal tax liens on their property.

In August 1977, Revenue Officer Richard Byrnes, an IRS employee in the Asbury Park office, requested permission from the special procedures staff of the IRS to file a federal tax lien against East of Eden, ¹ to prevent the transfer of the property while the tax liabilities were unpaid. Also during August 1977, Byrnes called Kathleen Asmar to schedule a meeting to discuss her tax liability. During the meeting, Kathleen Asmar signed an affidavit regarding the East of Eden business, stating that she owned 10% of the corporation and her estranged husband owned the remaining 90%. App. at 213-14.

The Asmars were legally divorced in New Jersey Superior Court on November 7, 1977. Under the terms of the divorce agreement, Kathleen Asmar received and now fully owns two houses on Seeley Avenue in Keansburg, New Jersey. Liens were placed on this property in February of 1977. She and her current husband reside in one of the houses, and her daughter and her daughter's family reside in the other. In addition to ordering the transfer of all title in the Seeley Avenue houses to Kathleen Asmar, the New Jersey Superior Court ordered that Robert Asmar hold Kathleen Asmar harmless from all liens and judgments in his name, or in the name of East of Eden, and to pay the taxes outstanding on the property. App. at 60.

Soon after the divorce, in November of 1977, Byrnes called Kathleen Asmar again to make arrangements to pay off the tax lien on her property. Kathleen Asmar showed him a copy of her divorce agreement and was told by Byrnes that the IRS would proceed against Robert Asmar instead.

In January of 1978, the Regional Counsel of the IRS granted permission for a nominee lien ² to be filed against East of Eden. Byrnes' request for a levy, however, was denied. In a memorandum dated February 21, 1978, Byrnes requested permission to institute an action to enforce the lien against East of Eden. At that time, Byrnes estimated that the forced sale value of the business would cover the total outstanding tax liabilities. App. at 218.

Over a year later, Byrnes sent a statement detailing the outstanding joint tax liabilities, dated March 23, 1979, to Kathleen Asmar. She testified at trial that she called Byrnes and told him that her attorney had called her to inquire whether she wanted to take legal action against her former husband to collect the back taxes under the terms of the divorce agreement. Byrnes advised her that she should not bother to spend $3,000 for attorney fees to bring an action against Robert, because the IRS was going to do the "same thing." App. at 268. Asmar testified that she informed her attorney of her conversation with Byrnes. Following the discussion with Byrnes, Kathleen testified that she began to cooperate actively with the IRS by, among other things, informing Byrnes that Robert was hiding his assets by transferring them to relatives and friends.

In the summer of 1980, IRS agent Byrnes was transferred to the Toms River office, and retired shortly thereafter. When Asmar called the Asbury Park office, she was referred to Carl Auther. Asmar called Auther and told him that she was concerned that her former husband was transferring his property to avoid the tax lien on East of Eden. Asmar testified that Auther told her that the IRS was pursuing Robert for the taxes. She called again later and was supposedly told by Auther to "mind her own business" and that the IRS would bring an action against Robert Asmar when it was ready.

After the second call to Auther, Asmar had her lawyer, Joseph Defino, send a letter, dated December 10, 1981, to the IRS. The letter acknowledged that the two houses on Seeley Avenue were subject to the lien, and noted that the lien prevented the transfer of the property. The letter also stated that Robert Asmar had transferred property, including a liquor license, to his girlfriend. App. at 74-75. A second letter to the IRS, dated June 1, 1983, from Kathleen's current attorney, Richard Friedman, listed various assets held by Robert Asmar which could be used to satisfy the outstanding liabilities. App. at 71-73. As the government notes in its appellate brief, neither of these letters state that Kathleen was foregoing her right to enforce her divorce judgment because of the IRS agents' representations.

II.

The government filed this suit against Kathleen and Robert Asmar on November 9, 1982, seeking judgment on the assessed taxes. Kathleen Asmar filed an answer raising an estoppel defense, as well as the affirmative defenses of failure to state a claim upon which relief can be granted, statute of limitations, estoppel and waiver, laches, and the failure to mitigate damages. In addition, she filed cross-claims against Robert Asmar for contribution and indemnification.

On September 23, 1983, the district court granted the government's motion for summary judgment against Robert Asmar, but denied it against Kathleen Asmar, basing its decision upon Community Health Services of Crawford County v. Califano, 698 F.2d 615 (3d Cir.1983), rev'd sub nom. Heckler v. Community Services of Crawford County, 467 U.S. 51, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984).

After the Supreme Court's reversal of the Crawford County decision, the government renewed its motion for summary judgment. A bench trial was held on December 18, 1985. ³ Asmar's testimony is outlined above. She also testified that, on the basis of Byrnes' assurances to her, she did not bring an action against Robert to enforce the divorce agreement. App. at 187.

Carl Auther, the IRS agent, testified that he had never been assigned the Asmar case and that he never told Asmar that the IRS was going after Robert on their joint liabilities. He did acknowledge that he received a call from someone saying she was Kathleen Asmar, and, believing that the caller was referring to Robert's individual liabilities, he told the woman that the IRS would not proceed against her.

While Revenue Officer Richard Byrnes did not appear at the trial because of recent surgery, the district court admitted Byrnes' certified statement that "Mrs. Rosenbaum [Asmar] may have believed from our conversations that in return for her cooperation, because of her real and substantial fear of Robert Asmar, her home and her house across the street which she owned and obtained as a result of the divorce settlement would not be touched by the Internal Revnue [sic] Service because it did not appear morally right and would not satisfy all the tax liabilities." App. at 119.

The district court entered judgment in favor of Kathleen Asmar on July 29, 1986. The order dismissed all claims against Kathleen Asmar, and voided all liens against her property.

In support of its decision, the district court made several findings of fact and conclusions of law. The court found that Asmar was "in continual contact with revenue agents and assisting them with information regarding her ex-husband's assets, was continually assured that the Government would go after...