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6331 Bankruptcy page 1 | |
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Catherine Beverly v. Commissioner.
A final notice of intent to levy that the
The Tax Court had jurisdiction over an individual's petition
challenging an
Catherine Beverly, pro se; Karen Baker and Michael W. Bitner,
for respondent. P filed a bankruptcy petition. R subsequently issued to P a Final
Notice of Intent to Levy and Notice of Your Right to Hearing
(final notice of intent to levy) under sec.
6330, I.R.C. After P's bankruptcy case was closed, R
issued to P a Notice of Determination Concerning Collection
Action(s). P filed with the Court a Petition for Lien or Levy
Action. R filed a Motion for Summary Judgment, and a supplement
thereto. Held: The final notice of intent to levy was issued to P in
violation of the automatic stay imposed under 11 U.S.C. sec.
362(a) (2000) and was invalid and of no effect. Held, further,
R's Motion for Summary Judgment, as supplemented, is denied, and a
decision will be entered that respondent may not proceed with the
proposed collection action.
MEMORANDUM
OPINION PANUTHOS, Chief Special Trial Judge: This collection review case is
before the Court on respondent's Motion for Summary Judgment, as
supplemented, filed pursuant to Rule 121.1
Summary judgment is intended to expedite litigation and avoid
unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner
[Dec.
44,689], 90 T.C. 678, 681 (1988); Naftel v.
Commissioner [Dec.
42,414], 85 T.C. 527 (1985). Summary judgment may be
granted with respect to all or any part of the legal issues in
controversy "if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law." Rule 121(b); Sundstrand Corp.
v. Commissioner [Dec.
48,191], 98 T.C. 518, 520 (1992), affd. [94-1
USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994); Zaentz v.
Commissioner [Dec.
44,714], 90 T.C. 753, 754 (1988). The moving party
bears the burden of proving that there is no genuine issue of
material fact, and factual inferences will be read in a manner
most favorable to the party opposing summary judgment. Dahlstrom
v. Commissioner [Dec.
42,486], 85 T.C. 812, 821 (1985); Jacklin v.
Commissioner [Dec.
39,278], 79 T.C. 340, 344 (1982). Based upon our review of the record, we are satisfied that there is
no genuine issue as to any material fact and that judgment may be
rendered as a matter of law. However, as discussed in detail
below, we conclude that the law does not support respondent's
position. We hold that the final notice of intent to levy was
issued to petitioner in violation of the automatic stay arising
from her case in bankruptcy and therefore is invalid. Accordingly,
we shall deny respondent's Motion for Summary Judgment, as
supplemented, and we shall enter a decision that respondent may
not proceed with the proposed collection action.
Background
2
On In the meantime, on On On On As indicated, respondent filed a Motion for Summary Judgment.
Respondent contends that the Court should sustain the notice of
determination on the ground that the Appeals officer did not abuse
her discretion in rejecting petitioner's offer in compromise--the
sole issue that petitioner purportedly raised during the
administrative proceedings--because petitioner was not current in
filing her tax returns at that time. Respondent's motion was called for hearing at the Court's motions
session held in Washington, D.C. During the hearing, counsel for
respondent informed the Court that respondent had recently
discovered that the final notice of intent to levy was issued to
petitioner while petitioner's first bankruptcy case remained open.
The Court subsequently directed respondent to file a supplement to
his motion addressing the question whether the final notice of
intent to levy was issued to petitioner in violation of the
automatic stay imposed under 11 U.S.C. section 362(a)(2000).
Respondent filed a supplement, as directed, and the matter was
called for further hearing at the Court's motions session.
Respondent maintains that while the issuance of the final notice
of intent to levy may have violated the automatic stay, petitioner
should nevertheless be estopped from arguing that the final notice
of intent to levy was issued in violation of the automatic stay
because she failed to inform respondent during the administrative
proceedings that she had filed a bankruptcy petition.4
Discussion Section
6331(a) provides that, if any person liable to pay any
tax neglects or refuses to pay such tax within 10 days after
notice and demand for payment, the Secretary is authorized to
collect such tax by levy upon property belonging to the person. Section
6331(d) provides that the Secretary is obliged to
provide the person with notice, including notice of the
administrative appeals available to the person, before proceeding
with collection by levy on the person's property. Section
6330 generally provides that the Commissioner cannot
proceed with the collection of taxes by way of a levy on a
person's property until the person has been given notice of, and
the opportunity for, an administrative review of the matter (in
the form of an Appeals Office hearing), and if dissatisfied, with
judicial review of the administrative determination. Section
6330(d) provides for judicial review of the
administrative determination in the Tax Court or a Federal
District Court, as may be appropriate. To obtain judicial review,
the person must file a petition with the appropriate court within
30 days of the mailing of the notice of determination. Sec.
6330(d)(1).5
There is no dispute in this case that respondent issued to
petitioner a final notice of intent to levy after petitioner filed
her bankruptcy petition and while the automatic stay remained in
effect. Under the circumstances, we must evaluate respondent's
position in light of the provisions governing the automatic stay. Title 11 of the United States Code provides uniform procedures
designed to promote the effective rehabilitation of the bankrupt
debtor and, when necessary, the equitable distribution of his or
her assets. See H. Rept. 95-595, at 340 (1977). One key to
achieving these aims is the automatic stay which generally
operates to temporarily bar actions against or concerning the
debtor or property of the debtor or the bankruptcy estate. See Allison
v. Commissioner [Dec.
47,739], 97 T.C. 544, 545 (1991); Halpern v.
Commissioner [Dec.
47,424], 96 T.C. 895, 897-898 (1991). The automatic stay provisions are set forth in 11 U.S.C. section
362(a) (2000), which provides in pertinent part: (a) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this title, * * *
operates as a stay, applicable to all entities, of -- (1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other
action or proceeding against the debtor that was or could have
been commenced before the commencement of the case under this
title, or to recover a claim against the debtor that arose before
the commencement of the case under this title; * * * * * * * (3) any act to obtain possession of property of the estate or of
property from the estate or to exercise control over property of
the estate; * * * * * * * (6) any act to collect, assess, or recover a claim against the
debtor that arose before the commencement of the case under this
title; * * * Unless relief from the automatic stay is granted by order of the
bankruptcy court, see 11 U.S.C. sec. 362(d) (2000), the automatic
stay generally remains in effect until the earliest of the closing
of the case, dismissal of the case, or the grant or denial of a
discharge, 11 U.S.C. sec. 362(c)(2); see Allison v.
Commissioner, supra at 545; Smith v. Commissioner
[Dec.
47,113], 96 T.C. 10, 14 (1991); Neilson v.
Commissioner [Dec.
46,301], 94 T.C. 1, 8 (1990).
As previously discussed, the automatic stay under 11 U.S.C. section
362(a)(1) bars "the commencement or continuation, including
the issuance or employment of process, of a judicial,
administrative, or other action or proceeding against the debtor
that was or could have been commenced before the commencement of
the case under this title". Based upon the plain language of
11 U.S.C. section 362(a)(1), we conclude that respondent violated
the automatic stay when he issued to petitioner the final notice
of intent to levy dated November 26, 2001. In particular, there is
no dispute in this case that respondent could have issued a final
notice of intent to levy to petitioner regarding her unpaid income
taxes for 1985 to 1988, and 1994 and 1995 before petitioner filed
her bankruptcy petition. Moreover, we are satisfied that the
issuance of the final notice of intent to levy constituted the
commencement of an administrative proceeding against petitioner
within the meaning of 11 U.S.C. section 362(a)(1). See, e.g., Smith
v. Commissioner [Dec.
55,921], 124 T.C. __ (2005) (holding that a notice of
determination issued under section
6330 to a taxpayer/debtor in bankruptcy constituted the
continuation of an administrative collection action against the
debtor within the meaning of 11 U.S.C. section 362(a)(1)). In
particular, when the Commissioner issues to a person a final
notice of intent to levy, that person is entitled to invoke the
administrative and judicial procedures prescribed under section
6330. Id. at __. Indeed, should such person fail
to timely request an administrative hearing, the Commissioner
generally is free to proceed with the proposed levy. Consistent
with the foregoing, we conclude that 11 U.S.C. section 362(a)(1)
barred respondent from issuing to petitioner the final notice of
intent to levy dated November 26, 2001.6
Our holding that the issuance to petitioner of the final notice of
intent to levy violated the automatic stay is consistent with both
bankruptcy case law and respondent's administrative guidance. See In
re Parker, 279 Bankr. 596, 602-603 (Bankr. S.D. Ala. 2002)
(The Commissioner conceded, and the bankruptcy court held, that
the issuance of a final notice of intent to levy under section
6330 violated the automatic stay.); In re Covington,
256 Bankr. 463, 465-466 (Bankr. D.S.C. 2000) (The bankruptcy court
held that a final notice of intent to levy did not constitute a
notice and demand for payment within the meaning of 11 U.S.C.
section 362(b)(9)(D)) and that such notice was issued to the
debtor in violation of the stay); see also Chief Counsel Adv.
00-18-005 (May 5, 2000) (A Final Notice of Intent to Levy issued
to a person who had filed a bankruptcy petition violated the
automatic stay and was void). At this point, a brief comment regarding the Court's jurisdiction
is warranted. We recently held in Smith v. Commissioner [Dec.
55,921], 124 T.C. __, that a notice of determination
under section
6330 issued to a taxpayer/debtor while the automatic
stay was in effect was invalid, and we dismissed the case for lack
of jurisdiction on that ground. The facts in the present case are
distinguishable from those in Smith v. Commissioner [Dec.
55,921], 124 T.C. __. Specifically, the notice of
determination upon which this case is based was issued to
petitioner well after the automatic stay was terminated. Because
the petition was timely filed in response to a notice of
determination that is valid on its face, we conclude that
petitioner properly invoked our jurisdiction under section
6330. See Sarrell v. Commissioner [Dec.
54,494], 117 T.C. 122, 125 (2001); Moorhous v.
Commissioner [Dec.
54,316], 116 T.C. 263, 269 (2001); Offiler v.
Commissioner [Dec.
53,912], 114 T.C. 492, 498 (2000); see also Rule
330(b). Respondent maintains that petitioner should be estopped from
asserting that the final notice of intent to levy violated the
automatic stay because she failed to inform respondent during the
administrative proceedings that she had filed a bankruptcy
petition. Respondent cites Matthews v. Rosene, 739 F.2d 249
(7th Cir. 1984), for the proposition that a debtor may be barred
by the equitable doctrine of laches from challenging an action
that arguably violated the automatic stay. We are not persuaded by respondent's argument. The record suggests
that petitioner was acting pro se throughout the administrative
proceedings. Without more, we presume that petitioner acted in
good faith and that she was unaware that respondent's issuance of
the final notice of intent to levy violated the automatic stay.
Respondent, on the other hand, had previously issued
administrative guidance in the form of a Chief Counsel Advisory
(cited above) concluding that the issuance of a final notice of
intent to levy to a person with an open bankruptcy case would
violate the automatic stay. Considering respondent's
administrative guidance on this specific point, we disagree with
respondent that petitioner should be estopped. Considering all the
circumstances, we decline to apply an equitable principle to bar
consideration of the validity of the final notice of intent to
levy. We recently noted that collection activity undertaken in violation
of the automatic stay generally is considered void or invalid. See
Smith v. Commissioner [Dec.
55,921], 124 T.C. __ (2005) (citing 9B Am. Jur. 2d,
Bankruptcy, sec. 1756 (1999)). The U.S. Court of Appeals for the
Seventh Circuit, the court to which an appeal in this case would
lie, adheres to this view. See Middle Tenn. News Co. v. Charnel
of Cincinnati, Inc., 250 F.3d 1077, 1082 (7th Cir. 2001). In sum, we conclude that the final notice of intent to levy was
issued to petitioner in violation of the automatic stay, and
therefore, it was invalid. It follows that respondent abused his
discretion by concluding in the notice of determination that the
proposed levy should proceed. To reflect the foregoing, An Order denying respondent's Motion for Summary Judgment, as
supplemented, and a decision will be entered for petitioner.
[2002-2 USTC ¶50,614] In re J. Greg Goodykoontz and Toni B.
Goodykoontz, Debtors. J. Greg Goodykoontz and Toni B. Goodykoontz,
Plaintiffs v. United States of America on behalf of its agency,
the Internal Revenue Service, and The State of West Virginia on
behalf of its agency, The WV Dept. of Tax and Revenue, Defendants U.S. Bankruptcy Court, No. Dist. W.Va., 00-10902,
5/30/2001
FRIEND II, Bankruptcy Judge: This matter is before the Court pursuant to the Plaintiffs' motion
for summary judgment. The Plaintiffs, who are debtors in
possession, filed this adversary proceeding to establish the
validity of tax liens and to value property subject thereto. The
Court has jurisdiction by virtue of 28 U.S.C. §1334 and the
standing order of reference in this District. The matter before
the Court is a core proceeding pursuant to 28 U.S.C. §157(b). FACTS The plaintiffs, J. Greg Goodykoontz and Tori B. Goodykoontz,
("debtors") filed for relief under Chapter 11 of the
Bankruptcy Code on Property Value Claimed Exemption Prior Consensual Liens
Residence ................ 175,000 0 150,713.36
Cash ..................... 50 50 0
Checking, City Nat'l ..... 1,000 1,000 0
Checking, One Valley ..... 75 75 0
Household Goods .......... 7,420 7,420 0
Pictures ................. 3,000 3,000 0
Jewelry .................. 24,160 1,000 24,000
Tea Set .................. 1,500 0 7,500
Wearing apparel .......... 2,500 2,500 0
Firearms ................. 250 250 0
401(k) ................... 20,000 20,000 39,548
IRA ...................... 15,000 15,000 9,295
Partnership .............. 17,000 15,000 0
Miata .................... 3,500 3,500 0
Honda .................... 18,000 0 18,120.94
Audi ..................... 13,000 0 14,000
Prior to the bankruptcy filing, tax liens were filed by the United
States of America on behalf of the Internal Revenue Service
(" The tax liens of the Lien Amount Period Ending Assessed Filed
$49,388.20
49,762.17
65,100.78
92,281.29
97,769.79
68,296.08 |