U.S.C.A. Title 6, Section 15,
under which these bonds were deposited in lieu of bail contains these
contained therein shall effect the authority of the Courts over the
securities where such bonds are taken as security in judicial
proceedings or the authority of any administrative officer of the
to receive U.S. Bonds for security in cases authorized by existing laws.
This section would be
meaningless if it did not permit the Court to determine the rightful
ownership of the bonds where contesting liens or claims are filed with
the consent of the Court against the bonds so deposited. This is clear
from Bankers Mortgage Company v. McComb, 60 Fed. (2nd) 218
Upon the argument much stress
was laid upon the claimed irregularity of the lien filed by the
Collector of the 3rd collection district against the property of
Flegenheimer on the ground that the latter was a resident not of the 3rd
but of the 14th collection district. The indictment in this district
under which Flegenheimer was tried and acquitted was urged as conclusive
that Flegenheimer was a resident of the 14th district and not of the 3rd
district of which the defendant Higgins is collector. Such indictment is
not conclusive as to the residence of Flegenheimer. Chatangco v.
But the conclusive answer to the
claim of insufficiency or invalidity of the lien filed by the Collector
of the third district against Flegenheimer because he is claimed to be a
resident of the 14th District is found in 26 U.S.C.A. Section 1613. This
section provides that any collector may seize or sell any property, real
or personal, or any right or interest therein, situated in any other
collection district within the state in which such officer resides,
notwithstanding the provision of Section 3209 of the revised statutes.
It is clear, therefore, that the
collector may file a lien against the property of the defendant
Flegenheimer whether he resides in the 3rd or 14th collection districts
of the State of
We come now to the chief
question in the case, viz., whose was the money used to purchase the
The $40,000 provided by Weinberg
and the $24,000 provided by Schneck may be viewed from three aspects:--
(a) That these moneys were at
all times the moneys of Flegenheimer.
(b) That Weinberg and Schneck
loaned the money to Flegenheimer through his agent Davis.
(c) That Weinberg and Schneck
gave the money to
as bailee merely to deposit as bail for Flegenheimer and then to be
returned to them.
This last is plaintiff's claim.
But in addition plaintiff was permitted over defendant's objections to
show by the testimony of Weinberg and Schneck at the last hearing that
they were both willing that plaintiff should receive all the bonds
including any purchased with their money or in which they might have an
interest, making a sort of legal or equitable assignment to plaintiff on
This is also inconsistent with
the contention that legal title to the bonds was in plaintiff and is
doubtless intended to cure any defect in plaintiff's legal title to the
bonds or as stated by plaintiff's counsel, to meet the court's previous
suggestion that Weinberg and Schneck might be made parties.
That this $40,000 obtained from
Weinberg and the $24,000 from Schneck was in reality the property of
Flegenheimer, may reasonably be inferred from the evidence. Neither
could give any satisfactory explanation of the source from which they
obtained the money.
Weinberg said he kept it in a
tin box in a secret compartment in the floor of his flat. He also had a
secret compartment in the flat which he occupied before he moved to his
present place of residence and probably at or about the time he produced
the money, but he was very hazy as to which apartment he lived in at the
time he delivered the money to Davis. He testified that he always
carried large sums around with him and had no bank account and no safe
deposit box and no place from which he obtained the money except the
little tin box in the secret compartment in the floor of his flat.
Schneck said that he took the
money from a safe deposit box in both of the denominations of $50.00 and
$100.00 each. It will be remembered that Schneck's $24,000.00 was in
denominations of $500.00 and $1,000.00 each.
These two men procured this
money the same or the next day after the request by Davis,
Flegenheimer's attorney and agent. It is a more reasonable inference
that they knew or were told where to go and get money belonging to
Flegenheimer, left with them or with some one else, than it is to
conclude that they actually kept such large sums of money of their own
in a tin box concealed in the floor or elsewhere concealed. It is true
that Schneck was first sworn as a witness for the defendant collector
but on this later hearing he was expressly made a witness for plaintiff
and Weinberg was plaintiff's witness. Schneck was in any event in the
nature of an adverse party. He was extremely vague as to how, when and
where he obtained the money except that he won it on horse races in
Both were long time friends of
Flegenheimer. Schneck admitted that Flegenheimer did him a great favor
some years ago.
The record of one and the
business and associates of both are not such as to require one to
believe that they would let deviation to truth militate too much against
their own interests on that of their friends. Neither was supported by
any other witness as to the source from which the money was obtained and
there were apparently some witnesses available to prove that they had
the money where they said they did, had that been the fact.
But be that as it may, and
assuming that the $40,000 and $24,000 was their own money, the facts
clearly warrant the conclusion that they gave the money to
for Flegenheimer to use for Flegenheimer's benefit. In short, a loan to
It is undisputed that they
delivered the money to Davis, the attorney and agent of Flegenheimer,
who had been instructed by the latter to go to them and get the money.
was Flegenheimer's agent. This would be true whether the agency arose
from his services as attorney or otherwise. Here the agency was specific
It is true that both Schneck and
Weinberg under cross examination by the plaintiff said they advanced the
money to Davis for bail and expected to get it back when the purposes of
bail had been completed and Davis rather vaguely said the same thing.
thought he gave both of them some receipt so reciting. Neither produced
any such receipt, if any ever existed. If any such receipt had been in
existence it would have been produced for all parties knew its
Weinberg and Schneck both knew
when they testified that the $40,000 and $24,000 was at stake. They knew
also that Flegenheimer was no longer living and it may be assumed that
they believed that there was probably little or no chance of recovering
the money from his estate.
Weinberg said be expected
plaintiff's attorney and Davis to get for him the money they delivered
. Both knew, of course, that the Government claimed the money under the
tax lien against Flegenheimer. The testimony that the money was
for bail only and to be returned to them was afterthought made to serve
their own interests. That they knew Flegenheimer wanted to use it for
his bail in no way militates against the view that they loaned the money
to Flegenheimer. It was no less a loan because they knew for what
purpose he intended to use it.
Moreover, Schneck admitted upon
cross-examination that he loaned the money to the Dutchman, meaning
Flegenheimer. Clearly if he loaned the money to Flegenheimer he did not
deliver it to
as bailee for bail purposes only.
The Court is not obliged to
accept the testimony of these witnesses in this respect when it is
inconsistent with other testimony and reasonable inferences therefrom
and is so plainly self serving.
' statement on the subject is vague and unconvincing and not free from
the category of evidence seeking to serve the interest of himself and
The conclusion then is that
Schneck and Weinberg loaned the money to Flegenheimer through his agent
Davis with title passing to Flegenheimer and the money was therefore the
property of Flegenheimer.
It was this money then obtained
from Weinberg and Schneck, after being used in a circuitous
"collateralization" of loans obtained thereunder and a
certified check of "Stitch" McCarthy, that was the purchase
price of the bonds and was all delivered to Isaac N. Jacobson, who used
it, after taking something for his services, and the $25,000 of Joseph
Jacobson, for purchase of these bonds.
As heretofore stated, the device
of the plaintiff Joseph Jacobson in giving his note in the sum of
$78,003.21 to Isaac N. Jacobson for the loan of the money which secured
the bonds is valueless as a device to transfer title to the bonds. It
follows, therefore, that all the bonds were purchased with the
Flegenheimer money except so much of the purchase price as came from the
When we come to the matter of
the contribution of Joseph Jacobson to the purchase of the bonds, it is
reasonably clear that it was his money drawn from savings banks. At
least that is the oral testimony and while the books were not presented
and he was not sworn as a witness by either party, the burden of proof
is that it was his money. He never knew Flegenheimer, so far as the
evidence discloses and never had any transactions with him nor with his
agent, J. Richard Davis. He loaned the money at the request of his
uncle, the attorney Isaac N. Jacobson, to buy the bonds for the purpose
of depositing them as bail.
There seems no reason to believe
that so far as this $25,000 is concerned, that it was ever the property
of Flegenheimer. Jacobson loaned the money to his nephew, Isaac N.
Jacobson. True, the latter was also an attorney for Flegenheimer, but it
was well known and understood at the time that the loan was for the
purchase of liberty bonds to be deposited as bail for Flegenheimer in
the name of the plaintiff. There can be no doubt that plaintiff Joseph
Jacobson relied upon his nephew, Isaac N. Jacobson, the attorney, to use
the money for the purchase of bonds and knew that the bonds purchased
therewith were to be deposited by him in his name and that he would
secure their return when the purposes of bail had been satisfied. It
would be unreasonable under the evidence in this case to conclude that
he ever intended to loan money to Flegenheimer or to accept the latter's
responsibility. True, he took the chance that Flegenheimer might not
appear to answer the indictment but that is vastly different from making
any loan to Flegenheimer. That is the element of risk in all bail.
Plaintiff who advanced only
$25,000 should have only bonds to that amount which have matured or been
called and if that is not sufficient he should have out of the proceeds
of the remainder, only so much as will bring him a total of $25,000.
The bonds subject to the last
stated condition are awarded to the defendant collector under his lien
to be enforced as the statute provides.
Decree may be entered in
accordance herewith to be settled on notice if not agreed upon as to
[91-1 USTC ¶50,276] Joseph Carl
Dickerson and wife, Mary Elizabeth Dickerson, Plaintiffs v. United
States of America, Defendants
District Court, East. Dist. Tenn., Winchester Div., Civ. 4-90-001,
6103 , 6303
, and 7426
Wrongful levy: Wages: Proper party: Assessment: Sale of seized
property: Disclosure of return information.--A suit by individual
taxpayers alleging a wrongful levy on their wages and illegal
disclosures of their return information to the employer subject to the
levy was dismissed. Taxpayers have no standing to bring a wrongful levy
action, as that remedy is reserved to third parties, but they may
challenge the procedural regularity of a tax lien. Since the government
properly made a formal assessment of tax and mailed the notice to the
taxpayers, however, a valid tax lien was created. That notice was
properly sent and received was evidenced by letters the taxpayers sent
to the IRS objecting to the notice. The taxpayers' objection to the sale
of their property was improper since levied wages are not sold. Finally,
the IRS did not make improper disclosure of return information to the
taxpayers' employer. Regulations allow disclosure of information
necessary for collection, and no disclosures were made other than those
necessary to effectuate levies, liens and possible sales of assets.
This is an
action by two pro se tax protesters, Joseph and Mary Dickerson,
in which they contend that the IRS wrongfully levied on their wages from
The Carrier Corporation and made unauthorized and illegal disclosures of
their return and/or return information on September 5 and 18, 1989. They
also seek to quiet title to various real and personal property subject
to the liens of the IRS. Although many of the voluminous pleadings
plaintiffs have filed are confusing and difficult to understand, it does
not appear that plaintiffs challenge the underlying tax liabilities.
Rather, they challenge the statutory notice procedures which they
contend have not been carried out. Currently pending is the defendant's
motion for summary judgment. For the reasons that follow, the motion is
Joseph and Mary Dickerson failed to submit income tax returns for the
1983, 1984 and 1985 tax years. Therefore, the IRS determined their tax
liabilities for them and issued notices of deficiency to them. As
reflected by IRS records, the notices were sent to Mr. Dickerson on
September 14, 1987
November 2, 1987
for 1984, and
October 17, 1988
for 1985. Notices were sent to Mrs. Dickerson on
June 8, 1987
for 1984, and
August 8, 1988
Dickerson[s] concededly failed to file petitions in the Tax Court and
accordingly deficiencies were assessed for their tax liabilities for the
delinquent years. On
July 27, 1989
, final notices of intention to levy were sent by certified mail to the
Dickersons. These notices notified the Dickersons of, among other
things, the following actions which the IRS might take should the
taxpayers fail to pay the amount due within thirty days:
you do not comply with this notice, we may take enforcement action
without any further notice to you. We may file a notice of Federal tax
lien which is public notice to your creditors that a tax lien exists
against your property. We may serve a notice of levy on your employer
for salary or wages you are due, and may levy on any bank accounts,
receivables, commissions, or other kinds of income you have. We may also
seize your property or rights to property, such as automobiles, and sell
it to satisfy your tax liability.
both taxpayers received these final notices of intention to levy is
evidenced by the IRS's receipt of acknowledging letters dated
July 31, 1989
in which the Dickersons claimed they were not "persons" within
the meaning of 26 U.S.C. §6331(d)
, the statutory provision requiring notice to a taxpayer
September 5, 1989
, notices of levy were issued to the plaintiffs' employer, The Carrier
Corporation, to seize non-exempt wages of plaintiffs. Notices of federal
tax lien were filed in the Registrar's Office for
September 18, 1989
first allege that the
wrongfully levied on their property because they did not follow proper
collection procedures outlined in the Code. Under 26 U.S.C. §7426(a) , only a third
party may bring an action for wrongful levy against the
. . If a levy has been made on property or property has been sold
pursuant to a levy, any person (other than the person against whom is
assessed the tax out of which such levy arose) who claims an interest in
or lien on such property and that such property was wrongfully levied
upon may bring a civil action against the United States in a district
court of the United States . . .
plaintiffs have no standing to bring a wrongful levy action.
U.S.C. §2410, a taxpayer may challenge the procedural regularity of a
tax lien, but not the validity of the underlying tax liability. Pollack
v. U.S. [87-2 USTC ¶9463 ],
819 F.2d 144 (6th Cir. 1987). In this case, the IRS carried out all of
the statutory requirements for creating valid tax liens. Pursuant to 26
U.S.C. §6203 , the IRS made a
formal assessment of the tax due by the Dickersons. Pursuant to the
requirements of 26 U.S.C. §6303(a)
, the IRS mailed notice of the assessment and demand for
payment to the Dickersons at their last known address. Thus, the
Government complied with the prerequisites for the creation of a valid
tax lien and is entitled to summary judgment on any claim by plaintiffs
under 28 U.S.C. §2410.
also complain that the IRS did not give plaintiffs proper notice
pursuant to 26 U.S.C. §6331(d) . That section
Requirement of notice before levy.--
In general. Levy may be made under subsection (a) upon the salary
or wages or other property of any person with respect to any unpaid tax
only after the Secretary has notified such person in writing of his
intention to make such levy.
Ten-day requirement. The notice required under paragraph (1)
given in person
left at the dwelling or usual place of business of such person, or
sent by certified or registered mail to such person's last known
no less than
10 days before the day of the levy.
July 27, 1989
, the required final notices, including notice of intention to levy,
were sent by the IRS to the Dickersons. That the Dickersons received the
notices is undeniable by virtue of their acknowledging letters of
July 31, 1989
26 U.S.C. §6335 deals with the sale
of seized property and provides for notice to the property owner of the
seizure of his property as soon as practicable after the seizure.
Although the IRS has apparently established liens on plaintiffs' real
and personal property, plaintiffs do not allege in their complaint that
any of this property has been seized other than plaintiffs' wages. Those
wages are, of course, not amenable to sale. There are no facts upon
which plaintiffs can base a claimed violation of 26 U.S.C. §6335
complaint also alleges that the IRS has made unauthorized disclosures of
plaintiffs' return and/or return information to third persons.
Plaintiffs identify these disclosures as occurring on
September 5, 1989
September 18, 1989
and "other times unknown to the plaintiffs." Apparently
plaintiffs refer to the Notices of Levy filed on
September 5, 1989
with plaintiffs' employer and the Notices of Federal Tax Liens recorded
September 18, 1989
at the Register of Deeds Office.
26 U.S.C. §6103(k)(6) allows the
Secretary to prescribe the circumstances under which certain disclosures
can be made. The regulations promulgated by the Secretary allow the IRS
to disclose return information
To establish or verify the financial status or condition and location of
the taxpayer against whom collection activity is or may be directed, to
locate assets in which the taxpayer has an interest, to ascertain the
amount of any liability described in subparagraph (3) of this paragraph
to be collected, or otherwise to apply the provisions of the Code
relating to establishment of liens against such assets or levy on or
seizure or sale of the assets to satisfy any such liability . . .
§301.6103(k)(6)-1(b) . Plaintiffs have not alleged any facts
which would support a conclusion that the IRS made any disclosures other
than those necessary to effectuate levies and liens and the possible
sale of assets. Accordingly, the defendant is entitled to summary
judgment on plaintiffs' claim of unauthorized disclosures.
In light of
the foregoing, defendant's motion for summary judgment is granted and
this action is dismissed. Plaintiffs' motion to strike defendant's
exhibits [Court File #57] is not well taken and is denied. Any other
pending motions are denied as moot.
[92-2 USTC ¶50,544] Cristofora
Berlanga, Plaintiff v.
United States of America
, Internal Revenue Service, Defendant
District Court, East. Dist.
, So. Div.-Flint, CIV. 91-CV-40385-FL,
6335 , 6532
Summary judgment: Suit for wrongful levy: Statute of limitations:
Notice and service of levy.--An issue of fact existed regarding the
validity of the service of levy and the notice of seizure. The court
could not make a determination on the IRS summary judgment motion
because the validity of the levy and of the notice of seizure affected
the statute of limitations issue of whether the plaintiff's suit for
wrongful levy was timely. The parties were given ten days to file
supplemental briefs concerning the validity of such service and notice.
MEMORANDUM OPINION AND ORDER
Court is the defendant's Motion for Summary Judgment, the plaintiff's
response, the plaintiff's supplemental memorandum in support of her
response, and the defendant's reply. For the reasons which follow,
disposition of the motion is WITHHELD pending the filing and review of
supplemental briefs in accordance with this opinion. Plaintiff's
counsel's motion to withdraw is GRANTED.
argues that this Court lacks jurisdiction to hear this case because the
plaintiff's claim is barred by the statute of limitations. Subchapter D
of Chapter 64 of the Internal Revenue Code, 26 U.S.C. §6301
et seq., provides a procedure by which the government
can seize and sell the property of delinquent taxpayers. For the seizure
and sale to be valid, the government must serve notice of the seizure of
property on the owner of the property. 26 U.S.C. §6335(a)
. Subchapter B of Chapter 76 of the Code, 26 U.S.C. §7421 et seq.,
governs proceedings by third parties against the government. §7426(a) provides a cause
of action against the government to any person who claims an interest in
property that is subject to a tax lien.
believes that Cristofora Berlanga holds the subject properties as
nominee for Santos Berlanga, her son (hereafter
) and that the property is therefore subject to levy for
' tax delinquencies. The IRS served a levy and notice of seizure on
Maria Berlanga, the plaintiff's daughter in law, on
November 30, 1989
. The property was sold on
April 12, 1990
. The plaintiff brings this suit pursuant to §7426(a) alleging that the
levy placed upon the property was wrongful because she, and not the
delinquent taxpayer, is the owner of the seized property.
of Chapter 66 of the Code provides periods of limitations in judicial
proceedings. §6532(c)(1) provides a
period of nine months from the date of the levy within which a person
protesting the seizure of the property may file suit against the IRS.
This nine-month period is extended for a year if a request for return of
the property is made within the original nine-month period. The one year
extended limitations period is marked from the date of filing of the
request for return of the property. §6532(c)(2)
August 27, 1990
, the plaintiff sent a request for return of property to the IRS. The
request was received on
September 6, 1990
. The present law suit was filed on
September 4, 1991
, more than one year after the date the request was sent, but less than
one year from its receipt.
focuses first upon the validity of the service of the levy and the
notice of seizure on
November 30, 1989
. She seems to be arguing in her brief that the person served had to be
in possession of the property when served. Since there is a question of
fact as to whether the plaintiff was in possession, the plaintiff argues
that an issue of fact exists regarding the validity of the service of
notice, and the factual issue precludes summary judgment. The
plaintiff's attack on the validity of the service is erroneous when it
is based on the issue of possession. The validity of the levy and the
notice of seizure affects the critical dates in this statute of
of the tax code operates,
in certain circumstances, to change the date of filing of the request
(1) Date of
delivery.--If any return, claim, statement, or other document required
to be filed . . . within a prescribed period or on or before a
prescribed date . . . is, after such period or such date, delivered by
United States mail to the agency, . . . the date of the United States
postmark stamped on the cover in which such return, claim, statement, or
other document, or payment, is mailed shall be deemed to be the date of
delivery . . ..
the request is received before the expiration of the prescribed period,
the request is deemed to have been filed on the date of receipt. Only if
the date of receipt is after the prescribed period has expired does §7502(a)(1)
change the filing date to the date postmarked on the
argues that her request was received before the expiration of the
prescribed nine-month period, so the
September 6, 1990
date of receipt of the request marks the beginning of the one-year
limitations period, not the postmark date of August 27th. Under this
interpretation, the plaintiff would have had until
September 6, 1991
to file her complaint, and her September 4th filing would not be barred
by the statute of limitations.
period is marked from the date of the levy. 26 U.S.C. §6532(c)(1)
September 6, 1990
receipt of the request could be timely only if service of the levy and
notice of seizure was not made nine months before; in other words,
December 6, 1989
. As discussed above, the plaintiff argues that the
November 30, 1989
service was invalid since she was not in possession of the subject
property when notice was given. She is willing to concede that the levy
was made when the property was sold on
April 12, 1990
, but she argues that there is an issue of fact whether the levy was
made before that date, or before
December 6, 1989
. The factual uncertainty of the date of the levy precludes any entry of
summary judgment that is based on the statute of limitations.
misreads the statute. It requires service of notice of levy and seizure
on the owner of the property. 26 U.S.C. §6335(a) . Service must be
made on the person in possession of the property only when personal
property is being seized. 26 U.S.C. §6335(a)
. The cases cited by the plaintiff in her Supplemental
Memorandum are inapplicable to this case. The property at issue in this
case is real property. The cited cases consider proper service in cases
involving personal property and are, therefore, distinguishable. It is
immaterial whether the government has established that the plaintiff was
in possession of the seized property at the time.
still is uncertain whether the levy and notice of seizure was valid on
November 30, 1989
. 26 U.S.C. §6335(a) requires the levy
and notice to be served on the owner of the property. The levy and
notice in this case was made upon Maria Berlanga, but I believe the
record demonstrates that the plaintiff, Cristofora Berlanga, is the
owner of record. Even if seizure of the residence may have been proper
because Cristofora merely was a nominee for the true owner and
delinquent taxpayer, Santos Berlanga, the statute would seem to require
that the notice of seizure, if it is to be valid, be served on the owner
of record. The government cites Dieckmann v. United States [77-1
USTC ¶9224 ], 550 F.2d 622 (10th Cir. 1977) to argue that it
is not necessary for the government to serve with notice all the
individuals with ownership interests in the seized property. Certainly
there is language in Dieckmann to support this argument.
law has always imposed a duty on the owners of property to exercise some
reasonable duty to care for it. In ordinary commercial transaction and
in speculative ventures, this duty or burden exists. We must assume that
Congress in fixing the nine-month period in section 6532 within which
an action may be brought assumed that owners of property would exercise
reasonable diligence in looking after it. Thus the period within which
the action may be brought under section 6532 was designed
to provide an opportunity to a person of reasonable diligence (in
keeping track of his own property) to discover if someone with whom it
had been entrusted no longer had it in his possession. Thus the period
was fixed and it will be applied. We must also assume that this was the
time fixed to permit the agency to function with some reasonable
dispatch. Some balance had to be reached between the rights and duties
of the individual, and of the needs of the governmental machinery.
USTC ¶9224 ], 550 F.2d at 624. Dieckmann involved
investors in a corporation organized to purchase silver. The
government's obligation to notify all of the numerous investors with an
ownership interest in a corporation is distinguishable from its
obligation to give notice to the single owner of record of a residence.
I am not comfortable concluding, based on the briefs filed thus far,
that the levy and notice of seizure served on Maria Berlanga is valid
when Cristofora Berlanga is the owner of record.
November 30, 1989
levy and notice of seizure is the critical link in the plaintiff's web
of arguments that there is a factual issue as to the appropriate date to
start the tolling of the one-year limitations period. Ultimately she
argues that the one-year period, marked from the filing of the request
for return of property, should be marked from the date the request was
received by the IRS,
September 6, 1990
. This would make the September 4th filing of the present law suit
the moment that the
November 30, 1989
service of the levy and notice of seizure upon Maria Berlanga satisfied
the requirements of §6532
, the nine-month limitations period began to run on that
date, and expired on
August 30, 1990
. The request for return was received on
September 6, 1990
, and would not have been timely. As a result, §7502(a)(1)
would operate to change the date of filing of the request for
return of property from the untimely
September 6, 1990
date to the timely postmark date of
August 27, 1990
, and the one-year limitations period would begin to run on that date.
The one-year period in which the plaintiff had to file a complaint to
avoid staleness would have expired on August 27th, 1991, and her
September 4th filing of the complaint would not be timely.
If, on the
other hand, service of the levy and notice of seizure on Maria did not
satisfy statutory requirements, there plainly is an issue of fact as to
when notice was given. Given the close proximity of the critical dates
in this case, only a few days of delay in the proper service of the
notice of seizure would make the
September 6, 1990
request for return timely when received. §7502(a)(1) would not
change the date of filing to the postmark date, and the filing of the
September 4, 1991
would be timely.
Due to the
critical nature of the issue, IT IS HEREBY ORDERED that the parties have
ten days from the entry of this Order to file supplemental briefs that
are limited to arguments regarding the validity of the
November 30, 1989
service of the levy and notice of seizure upon Maria, as opposed to
Cristofora, Berlanga. Given the narrow issue involved, a strict
five-page limit will be enforced on these briefs.
counsel also filed a motion to withdraw as counsel. A copy of the motion
was served upon the plaintiff. The motion is GRANTED.
[2001-2 USTC ¶50,640] Ralph G. Sachs,
Plaintiff v. United States of America, acting through the Internal
Revenue Service, and Quick and Reilly, Inc., a New York Corp.,
District Court, East. Dist.
, So. Div., 00-CV-73070-DT, 8/20/2001
Secs. 6331 and 7433
Suits by taxpayers: Unauthorized collection: Constitutional
provisions: Fourth Amendment: Failure to state claim.--An
individual's complaint alleging that the IRS violated the United States
Code, IRS regulations and his constitutional rights in connection with
the collection of his tax through liens and levies was dismissed for
failure to state a valid claim. His claims that the IRS violated a
revenue ruling and an Internal Revenue Manual provision by not
physically seizing his negotiable instruments held by his financial
broker, as well as the Fourth Amendment by not obtaining a writ of entry
when it "constructively seized" his negotiable instruments
were without merit. Because such claims were neither provisions of Title
26 of the U.S. Code nor regulations promulgated under Title 26, they
were not relevant to a suit for damages under Code
Sec. 7433 .
Sec. 1 ]
Constitutional provisions: Bivens claim.--An individual
was not permitted to amend his unauthorized collection complaint so that
he could bring a Bivens suit against individual IRS employees. Bivens
claims seeking monetary damages for actions arising out of the
collection of taxes are not valid.
Sec. 6335 ]
Validity of lien: Expiration of.--IRS levies on negotiable
instruments owned by an individual were valid despite the individual's
claim that notices of federal tax lien against him had expired before
the levies were assessed. Because the individual owned the instruments,
a valid lien was not required in order to effectuate the levy.
Sec. 6335 ]
Notices of seizure: Sufficiency of.--A taxpayer's claims that he
was not provided with the requisite Notice of Seizure in a collection
action and that the notice provided to his financial broker was not
sufficiently specific were rejected. Because the broker was the
possessor of the securities, the IRS was only obligated to provide
notice to the broker. Moreover, the IRS properly specified "various
negotiable instruments" and attached a list of property to be
Sec. 6502 ]
Statute of limitations: Collection statute expiration date.--The
government timely filed a collection action against a taxpayer within
the limitations period. The taxpayer's contention that the collection
statute expiration date (CSED) had passed was rejected. The record
demonstrated that court proceedings to reduce the tax assessment to
judgment began three days prior to the CSED.
Sec. 6332 ]
Compliance with levy: Effect of.--A financial broker did not
breach its fiduciary duty when it complied with an IRS levy against a
taxpayer's holdings. The broker was legally bound to honor the levy and
was not required to make a good faith determination that the property
was actually subject to a levy.
ORDER GRANTING UNITED STATES' MOTION TO DISMISS AND GRANTING QUICK
AND REILLY'S MOTION TO DISMISS
the court are two motions for dismissal for failure to state a claim
upon which relief can be granted, brought by Defendant United States of
") and Defendant Quick and Reilly ("Q & R"), filed on
October 19, 2000
October 11, 2000
, respectively. The motions are in response to a complaint filed by
Plaintiff Ralph Sachs on
July 7, 2000
, claiming unauthorized collection action against the
and claiming breach of fiduciary duty against Q&R.
Revenue Service ("the IRS") Revenue Officer Jacqueline Zogut
was assigned to collection from Mr. Sachs of a tax liability resulting
from underpayment of taxes in 1978 and 1979. The collection statute
expiration date ("CSED") for the tax liability was
July 4, 1999
. (Compl. ¶8.) The IRS sent a notice of levy to Q&R on
June 1, 1999
at ¶1.) On
July 1, 1999
, the IRS initiated court proceedings to have the tax liability reduced
to a judgment. The IRS cashed a check from Q&R in the amount of
$251,511.09 to satisfy the tax liability on
July 13, 1999
. The funds were obtained by levying and then liquidating various
negotiable instruments owned by Mr. Sachs and held by Q&R in its
capacity as a financial broker. On
September 23, 1999
, Mr. Sachs filed a claim for refund from the IRS, which was rejected on
February 9, 2000
, thus exhausting his administrative remedies for his claim against the
If a plaintiff
fails to state a claim upon which relief can be granted, then a
defendant can move for relief under Federal Rule of Civil Procedure
12(b)(6). A Rule 12(b)(6) motion tests whether a claim has been
adequately stated in the complaint. 1 In
evaluating a motion to dismiss under Rule 12(b)(6), all well-pleaded
factual allegations in the complaint are taken as true and the complaint
is construed liberally in favor of the non-moving party. Morgan v.
Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987);
, 537 F.2d at 858;
v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). A complaint should not
be dismissed because it does not state all the elements giving rise to a
legal basis of recovery, or because plaintiff misconceived the proper
theory or claim, if plaintiff is entitled to relief under any theory. Myers
, 636 F.2d 166, 169 (6th Cir. 1981). However, even though the
pleading standard is liberal, bald assertions and conclusions of law
will not enable a complaint to survive a Rule 12(b)(6) motion.
, 85 F.3d at 53.
A. Unauthorized Collection--IRS Claim
brings his claim pursuant to 26 U.S.C. §7433(a), which authorizes suits
against the U.S. if "in connection with any collection of Federal
tax . . . any officer or employee of the [IRS] recklessly or
intentionally, or by reason of negligence disregards any provision of
this title, or any regulation under this title." He makes
essentially six claims: (1) the IRS violated a revenue ruling and
Internal Revenue Manual ("IRM") provision by not physically
seizing his negotiable instruments, (2) the IRS violated the Fourth
Amendment by not obtaining a writ of entry when it "constructively
seized" his negotiable instruments, (3) the IRS collected the
negotiable instruments without a valid tax lien, (4) the IRS did not
follow proper procedure in its summons of a Q&R employee, (5) the
IRS did not notify him of the seizure of securities, and (6) the IRS did
not collect the liabilities within the allowable time period. The
asserts that Mr. Swift does not present a cognizable basis for relief
Violation of Revenue Rulings and the IRM
points out that Revenue Ruling 75-355, 1975-2 C.B. 478, and IRM §22.214.171.124(3)
require physical seizure when negotiable instruments are seized. The
U.S., however, claims that since these are neither a provision of Title
26 of the U.S. Code nor a regulation promulgated under Title 26, neither
the Revenue Ruling not the IRM are relevant to a suit for damages under
v. U.S. [2001-1 USTC ¶50,111], 234 F.3d 428, (9th Cir. 2000), the
Court of Appeals for the Ninth Circuit addressed the applicability of
IRM provisions and the IRS National Policy Statement ("NPS")
to §7433 claims. The court wrote that "because the manual and the
NPS are not code provisions or regulations, violations of the manual and
the NPS cannot support a claim under §7433."
at 434. This court is persuaded by the Ninth Circuit's reasoning and by
a clear reading of the statute, which states that a successful claim
under §7433 only occurs when Title 26, or a regulation promulgated
thereunder, is violated. 2 Thus, this
aspect of Mr. Sachs's claim must fail.
points to GM Leasing Corp. v. United States [77-1 USTC ¶9140],
429 U.S. 338 (1997), to support his contention that the IRS could not
seize his assets without a writ of entry. The IRS, however, never
physically seized the assets. Q&R liquidated Mr. Sachs' stocks and
gave the IRS a check in satisfaction of his tax liability. Mr. Sachs
claims this was a "constructive seizure" because the IRS
required Q&R to liquidate his assets.
Amendment cannot be part of a §7433 claim, as it is not a part of Title
26, nor a regulation promulgated under Title 26. An action seeking
monetary damages for constitutional violations by the government should
take the form of a Bivens 3 claim. Given
this anticipated determination, Mr. Sachs seeks leave to amend his
complaint so he can bring a Bivens suit against individual IRS
employees. Mr. Sachs concedes that Bivens actions seeking
monetary damages cannot be brought against the
or the IRS. (Resp. to IRS's Mot. at 9.) Granting leave to amend,
however, would be pointless because Mr. Sachs cannot bring a Bivens
claim seeking monetary damages for actions arising out of the collection
of taxes. Fishburn v. Brown [97-2 USTC ¶50,742], 125 F.3d 979,
982-83 (6th Cir. 1997).
Lack of a Valid Lien
Mr. Sachs, the IRS held four Notices of Federal Tax Lien
("NFTL") against Mr. Sachs, but all four NFTLs had expired
before the IRS levied Mr. Sachs' assets that were held by Q&R.
(Automated Lien Report, attached as Compl. Ex. A.) He asserts that an
NFTL supercedes the statutory lien provided under 26 U.S.C. §6321 4, which is
applicable whenever a taxpayer refuses to pay all or part of their
taxes. Accordingly, once an NFTL expires, he argues, the statutory lien
no longer attaches to the property. Nothing on the NFTL, however, says
that it supercedes the statutory lien. (NFTL, attached as Compl. Ex. B.)
Moreover, a valid lien is not required for all levies. The Code of
Federal Regulations dealing with Title 26 states that "[t]he
district director may levy upon any property, or rights to property,
whether real or personal, tangible or intangible, belonging to the
taxpayer. The district directory may also levy upon all property
with respect to which there is a lien. . . . " 26 C.F.R. §301.6331-1
(emphasis added). As the negotiable instruments held by Q&R were
owned by Mr. Sachs, a valid lien was not required.
claims that the IRS did not follow proper procedure in its summons of
Mr. Edwin Mendez, a Q&R employee. He claims that the IRS summons was
served by fax and required a response within one day. Pointing to 26
U.S.C. §§7603 5 and 7605(a) 6,
respectively, Mr. Sachs claims the IRS violated portions of Title 26.
of Title 26 cited by Mr. Sachs are located in Chapter 78, entitled
"Discovery of Liability and Enforcement of Title." The summons
to Mr. Mendez dealt with a levy and not with the discovery of liability
or the enforcement of title. Summonses relating to levies are governed
by 26 U.S.C. §6333, located under Chapter 64, Subchapter D, entitled
"Collection; Seizure of Property for Collection of Taxes,"
which states that:
If a levy has
been made or is about to be made on any property, or right to property,
any person having custody or control of any books or records, containing
evidence or statements relating to the property or right to property
subject to levy shall, upon demand of the Secretary, exhibit such books
or records to the Secretary.
from §6333 is any discussion of the requirements for the processing of
a summons intended to effectuate the collection of a levy. Thus, the
summons was proper.
5. Lack of Notice of Seizure
complains that he was not provided with the requisite Notice of Seizure,
mandated by 26 U.S.C. §6335(a), although his attorney was. (Compl. ¶25(v).)
He further argues that the Notice of Seizure that was filed was not
sufficiently specific, since it only stated that "various
negotiable instruments" had been seized. (Resp. to IRS's Mot. at
Sachs claims he was not provided with the Notice of Seizure, attached to
Mr. Sachs' complaint was a Notice of Seizure with the addressee listed
as "Ralph G Sachs; P.O. Box 10; Troy, MI 48099-0010."
Moreover, 26 U.S.C. §6335(a) provides that a Notice of Seizure
"shall be given by the Secretary to the owner of the property (or,
in the case of personal property, the possessor thereof)." Q&R
was the possessor of Mr. Sachs' negotiable instruments (Compl. at ¶12.)
As Q&R was the possessor of the securities, the IRS was only
required to provide a Notice of Seizure to Q&R.
further complains that the Notice of Seizure lacked the requisite
specificity. 7 (Resp. to
IRS's Mot. at 11-12.) The IRS stated that the property seized was
"various negotiable instruments," however, which was an
account of the property, as required by §6335(a). Moreover, on page two
of the Notice of Seizure attached to the Complaint, the IRS lists a
description of the property, including the number and type of shares
liquidated and then seized. 8
Statute of Limitations
asserts that the levy on the assets held by Q&R was improper because
it was not satisfied until after the CSED. The IRS asserts that 26
U.S.C. 6502(a), governing the collection of a levy, allowed it to
collect the tax liability after the expiration of the CSED.
The IRS points
to the following language of §6502 to support its assertion:
If a timely
proceeding in court for the collection of a tax is commenced, the period
during which such tax may be collected by levy shall be extended and
shall not expire until the liability for the tax (or a judgment against
the taxpayer arising from such liability) is satisfied or becomes
U.S.C. §6502(a). The IRS brought a proceeding in court on July 1 to
reduce the tax assessment to a judgment 9,
which was prior to the CSED of July 4. Accordingly, the deadline for
collecting the tax was extended until the tax liability was satisfied,
which occurred on July 13.
only rebuttal to the plain language of this statute is that "a
valid levy never occurred on [sic] this case." (Resp. to IRS's Mot.
at 12.) He provides no support for this contention. In his complaint and
in his response to the IRS's motion, he does discuss the alleged
invalidity of the lien, but nowhere else does he make the argument that
the levy itself is invalid. Indeed, no evidence on the record supports
such a conclusion. Mr. Sachs fails to state how or why the levy was
invalid, other than his futile claim, previously discussed, that the
levy was improper without a valid lien.
Breach of Fiduciary Duty--Q&R Claim
claim against Q&R vaguely avers that because Q&R failed to
investigate his assertion that physical seizure was required when
levying negotiable instruments, it breached its fiduciary duty to him.
(Compl. ¶29.) Q&R responds that it was legally required to comply
with an IRS levy.
claims that Q&R was not required to liquidate his negotiable
instruments and turn them over to the IRS because of Revenue Ruling
75-355, which requires the IRS to satisfy a levy on a negotiable
certificate of deposit by having said certificates surrendered to the
IRS. Initially, this revenue ruling deals with certificates of deposit
and not stocks, as were levied by the IRS in the instant case. Moreover,
Q&R is legally bound to honor an IRS levy pursuant to 26 U.S.C. §6332(e),
which states that:
Any person in
possession of . . . property or rights to property subject to levy and
upon which a levy has been made who . . . surrenders such property . . .
to the Secretary . . . shall be discharged from any obligation or
liability to the delinquent taxpayer and any other person with respect
to such property or rights to property arising from such surrender or
U.S.C. §6332(e). Indeed, one who ignores a levy may face stiff
sanctions, including liability for the entire amount of the levy, plus
costs, taxes and a penalty not greater than 50% of the value of the
levy. 26 U.S.C. §6332(d)(1), (2).
concedes that there was a levy in place. (Compl. ¶¶11, 13.) He also
admits that §6332(a) provides statutory immunity to "certain third
parties who surrender property pursuant to an Internal Revenue Service .
. . levy." (Resp. to Q&R's Mot. at 2.) He argues, however, that
Q&R is not entitled to such immunity because "prior to any
allowance of immunity under Section 6332(e) the third party involved
must make a 'good faith determination' that the property at issue was
actually subject to a levy." (
) Despite the lack of such a limitation on immunity in the language of
§6332(e), Mr. Sachs asserts that 26 C.F.R. §301.6332-1(c)(2) requires
a "good faith determination" before there is statutory
on 26 C.F.R. §301.6332-1(c)(2) is misguided. That section of the Code
of Federal Regulations is entitled "Exception for Certain
Incorrectly Surrendered Property" and removes statutory immunity
when a levy is enforced against property in which an uninvolved third
party has an interest, unless the levied party makes a good faith
determination that the delinquent taxpayer also has an interest in the
levied property. Clearly, that situation has no bearing on the instant
case. There is no need for a good faith determination in this case
because this suit is not being brought by a third party to whom the levy
did not apply. There is no debate that the levied property belonged to
Mr. Sachs, nor is there debate that it was Mr. Sachs who incurred the
only makes one other vague allegation against Q&R that "[a]t
all times . . . Q&R's first loyalty was to IRS [sic], and despite
explicit Treasury Regulations clearly on point, only after receiving
permission from Zogut did Mr. Davidson [of Q&R] agree that the
twenty-one day period would conclude as of July 6." 10 (Compl. ¶30.)
The fact that Q&R waited for permission from the IRS to agree that
the levy would expire on July 6 is not a basis for a claim of breach of
foregoing reasons, Mr. Sachs has failed to state a claim upon which
relief can be granted. Accordingly,
IT IS ORDERED
' "Motion to Dismiss" is GRANTED.
IT IS FURTHER
ORDERED that Quick and Reilly's "Motion to Dismiss Pursuant to
Fed.R.Civ.P. 12(b)(6)" is GRANTED.
1 Federal Rule
of Civil Procedure 8 sets forth the pleading requirements for a
complaint and requires only a "short and plain statement of the
claim." Fed. R. Civ. P. 8(a). Thus, a complaint is sufficient if it
gives the defendant "fair notice of what the plaintiff's claim is
and the grounds upon which it rests." Conley v. Gibson, 355
41, 47 (1957);
v. Lucas, 537 F.2d 857, 858 (6th Cir. 1976). However, the
complaint is required to provide a ' "statement of circumstances,
occurrences, and events in support of the claim presented.... [T]he
complaint must disclose information with sufficient definiteness.'
" Veney v. Hogan, 70 F.3d 917, 921-22 (6th Cir. 1995)
2 In addition,
Revenue Ruling 75-355 deals with negotiable certificates of deposit, not
stock certificates as were levied in this case, making the ruling
seemingly inapplicable to Mr. Sachs's case.
3 Bivens v.
Six Unknown Named Agents of Federal Bureau of Narcotics, 403
4 The statute
If any person
liable to pay any tax neglects or refuses to pay the same after demand,
the amount ... shall be a lien in favor of the United States upon all
property and rights to property, whether real or personal, belonging to
26 U.S.C. §6321.
5 26 U.S.C. §7603
requires service of a summons by registered or certified mail.
6 26 U.S.C. §7605(a)
requires that the IRS allow at least ten days to respond to a summons.
7 The Notice
of Seizure "shall specify the sum demanded and shall contain, in
the case of personal property, an account of the property seized."
26 U.S.C. §6335(a).
8 The Notice
of Seizure lists the property seized as follows:
4,950 shares of Lucent Technologies Inc stock
2,000 shares of Ligand Pharmaceuticals Inc stock
4,000 shares of Micron Technology Inc stock
50 shares of Niagara Mohawk Holdings Inc stock
1,000 shares of PSS World Medical Inc stock
2,000 shares of Altera Corp stock
36,000 shares of Atmel Corp stock
1,000 shares of Bank of Tokyo-Mitsubishi Ltd-- stock
2,000 shares of Cendant Corp stock
Seizure at 2, attached as Compl. Ex. B.)
withdrew this suit on
September 17, 1999
, as it was rendered moot by the successful levy of the funds in July.
10 The levy
was received by Q & R on
June 11, 1999
and required Q & R to satisfy the levy within twenty one days.
Because of the July 4 holiday weekend, the twenty one days expired on
July 6, according to Mr. Sachs.
G. Sachs, Plaintiff-Appellant v. United States of America, acting
through the Internal Revenue Service, Defendant-Appellee.
Court of Appeals, 6th Circuit; 01-2224, 59 FedAppx 116,
February 21, 2003
Unpublished opinion affirming DC Mich., 2001-2
Secs. 6331 and 7433]
Unauthorized collection actions: Civil actions: Damages: Exclusive
individual's complaint was properly dismissed because an alleged IRS
violation of the Internal Revenue Manual and a revenue ruling could not
support a claim under Code
Sec. 7433, as that provision authorizes damages only in cases
where Title 26 or any corresponding sections of the regulations have
been violated. Alleged Fourth Amendment violations similarly fell
outside the scope of Code
Sec. 7433. Furthermore, because Code
Sec. 7433 is the exclusive remedy for recovering damages
against IRS agents for violation of constitutional rights, a Bivens
action could not be maintained.
Secs. 6333 and 6335]
Summonses: Seizure: Notice requirements. --
issued to a brokerage firm that held securities for an individual was
proper, even though it did not provide ten-day notice and was not sent
by certified mail. The summons was issued for the purpose of collection
or seizure pursuant to Code
Sec. 6333; therefore, the certified mailing and notice
requirements of Code
Sec. 7602 did not apply. Furthermore, the IRS was only
required to provide a notice of seizure to the brokerage firm, and not
to the individual himself.
of seized property: Notice of sale or seizure. --
An IRS levy on
an individual's assets was not barred due to the expiration of the
limitations period. The IRS brought suit against the taxpayer prior to
the expiration date of the collection statute, whereupon the period of
collectibility was extended, and the time period did not lapse until the
tax was satisfied.
Before: Daughtrey and Cole, Circuit Judges, and Sargus, District Judge.
¬ Caution: The
court has designated this opinion as NOT FOR PUBLICATION. Consult the
Rules of the Court before citing this case.®
COLE, JR., Circuit Judge: Plaintiff-Appellant Ralph G. Sachs appeals the
dismissal of his claim against Defendant-Appellee United States of
America, acting through the Internal Revenue Service ("IRS"),
for unauthorized collection actions in violation of 26 U.S.C. §7433.
Quick and Reilly, Inc. ("Q&R") was also named as a
defendant in the original complaint; however, Sachs does not appeal the
dismissal of his complaint against Q&R. Pursuant to Federal Rule of
Civil Procedure 12(b)(6), the district court dismissed Sachs's complaint
for failure to state a claim upon which relief could be granted. For the
reasons that follow, we AFFIRM the judgment of the district
Sachs owed the IRS back taxes for the years 1978 and 1979. The
Collection Statute Expiration Date ("CSED"), until which the
IRS could collect the underlying tax liability in this matter, was
July 4, 1999
June 1, 1999
, the IRS mailed a Notice of Levy to Q&R, the brokerage firm which
held Sachs's investment securities. Q&R received the notice on
June 11, 1999
, and had twenty-one days from the date of receipt to forward the
requested funds to the IRS. During this three-week period. Sachs
informed Q&R that he believed IRS internal rulings prohibited
Q&R from liquidating his securities and forwarding the funds to the
IRS. In response, Revenue Officer Jennifer Zogut faxed a summons to
Edwin Mendez, Q&R's Assistant Director of Compliance, requesting
information regarding the negotiable instruments Q&R held for Sachs,
and requesting a response by the next afternoon.
On or about
July 1, 1999
, Q&R informed Sachs that it was going to respond to the Notice of
Levy by liquidating certain securities which he owned and forwarding the
corresponding monies to the IRS. On
July 1, 1999
, the IRS initiated court proceedings to have the tax liability reduced
to a judgment.
On or about
July 13, 1999
, a check in the amount of $251,511.09, in full satisfaction of the
levy, was obtained by the IRS from Sachs's account with the local
Q&R office. On
September 23, 1999
, Sachs filed a Form 843, Claim for Refund, which was denied by the IRS.
By filing this claim, Sachs effectively exhausted his administrative
remedies, thereby providing the district court with jurisdiction over
the present suit.
This Court reviews de novo a district court's grant of a motion
to dismiss for failure to state a claim pursuant to Federal Rule of
Civil Procedure 12(b)(6). Downie v. City of
, 301 F.3d 688, 693 (6th Cir. 2002). In reviewing a Rule 12(b)(6)
motion, this Court treats all well-pleaded allegations in the complaint
as true, and the Court affirms the dismissal only where "it appears
beyond doubt that the plaintiff can prove no set of facts in support of
the claims that would entitle him or her to relief."
Absence of Physical Seizure
26 U.S.C. §7433(a)
provides for the recovery of damages resulting from unauthorized
collection activities when "any officer or employee of the Internal
Revenue Service recklessly or intentionally, or by reason of negligence
disregards any provision of this title, or any regulation promulgated
under this title." Section
6331(a) of the Internal Revenue Code ("the Code")
states that when any person is liable to pay any tax and neglects or
refuses to pay that tax, it shall be lawful for the United States to
collect that tax "by levy upon all property and rights to property
... belonging to such a person or on which there is a lien provided in
this chapter for the payment of such tax." 26 U.S.C. §6331(a).
The Code also notes that "[t]he term `levy' as used in this title
includes the power of distraint and seizure by any means." 26
Sachs contends that the IRS was required to physically seize the
securities, rather than "seizing" their monetary value by
check after their liquidation. In failing to physically seize the
securities, Sachs argues that the IRS violated §6331
of the Code, thereby entitling Sachs to damages under §7433.
7433 of the Code authorizes damages for the intentional,
reckless, or negligent disregard of a "provision of this title, or
any regulation promulgated under this title." 26 U.S.C. §7433(a).
A successful claim under §7433
can only occur, therefore, when Title 26, or a regulation promulgated
thereunder, is violated. Here, the alleged violation is a violation of
the Internal Revenue Manual and a Revenue Ruling. These are not
violations of Title 26, nor are they violations of any corresponding
sections of the Code of Federal Regulations. As such, Sachs's claim
falls outside the scope of §7433's
The Ninth Circuit has ruled similarly. In Shwarz v. United States
USTC ¶50,111], 234 F.3d 428 (9th Cir. 2000), the court ruled
that "because the [IRS] manual and the [IRS National Policy
Statement] are not code provisions or regulations, violations of the
manual and the NPS cannot support a claim under §7433."
Id. at 434; see also Gonsalves v. Internal Revenue Serv. [
USTC ¶50,474], 975 F.2d 13, 16 (1st Cir. 1992) (holding that
does not support a claim for a "right" that is created by
internal IRS policy); cf. Schweiker v. Hansen, 450 U.S. 785, 789
(1981) ( per curiam) (holding that an agency policy manual
"is not a regulation," "has no legal force," and
"does not bind" the agency).
Because the alleged violation pertains to an internal IRS policy, rather
than a portion of the Code or corresponding regulations, §7433
cannot support a claim by Sachs based on the failure of the IRS to
physically seize the actual securities.
Illegal Seizure in Violation of the Fourth Amendment
Sachs argues that by forcing Q&R to liquidate the securities, the
IRS "constructively seized" the assets, and that by
constructively forcing this liquidation to obtain a check rather than
the instruments themselves, the
violated the Fourth Amendment. Sachs contends that this position is
supported under any one of three alternative theories: (1) a §7433
theory: (2) a G.M. Leasing theory; and (3) a Bivens
1. Section 7433 Theory
The Fourth Amendment is not a provision of Title 26, nor is it a
regulation promulgated thereunder. See 26 U.S.C. §7433(a).
Thus, by the plain language of the statute alleged Fourth Amendment
violations fall outside its scope.
2. G.M. Leasing Theory
Sachs argues that the IRS was required to obtain a writ of entry in
order to physically seize his securities. The Supreme Court has held
that a warrantless entry by IRS agents into a corporation's private
offices violated the Fourth Amendment because a search of private
property without proper consent is unreasonable unless it has been
authorized by a valid search warrant. G.M. Leasing Corp. v. United
States [ 77-1
USTC ¶9140], 429 U.S. 338, 352-53 (1977).
In this case, the IRS agents never entered any private property of
Sachs. Sachs nevertheless argues that because the securities were seized
on behalf of the government and subsequently liquidated on the
government's behalf, this "constructive seizure" was
substituted for the required physical seizure, and therefore gives rise
to a Fourth Amendment claim.
G.M. Leasing does not support the extrapolation suggested by
Sachs. In this context, the "constructive seizure" that Sachs
contends occurred is not the legal equivalent of an actual, physical
seizure because G.M. Leasing recognizes a Fourth Amendment
violation based on the privacy concerns that accompany a physical
G.M. Leasing Court
stated that, while §6331
of the Code is "silent on the subject of intrusions into
privacy," it is also an "authorization for all forms of
at 358 (emphasis added). While the IRS does need a warrant to enter
private premises in order to seize a delinquent taxpayer's property, the
IRS does not need judicial authorization to simply seize property where
it does not intrude upon privacy rights. See id. at 358: see
also Maraziti v. First Interstate Bank of Cal. [ 92-1
USTC ¶50,206], 953 F.2d 520, 524 (9th Cir. 1992) (stating
that "when the government seizes property to collect delinquent
taxes, there is no violation of the Fourth Amendment if the seizure is
not an invasion of the taxpayer's personal effects or premises").
G.M. Leasing Court
did not find a Fourth Amendment violation in the seizure of automobiles
which "took place on public streets, parking lots, or other open
places and did not involve any invasion of privacy." [ 77-1
USTC ¶9140], 429
Because the IRS did not invade Sachs's privacy rights, G.M. Leasing
does not support a finding in the present case that there was a Fourth
3. Bivens Theory
Lastly, Sachs argues that he is able to state a claim for a Fourth
Amendment violation under Bivens v. Six Unknown Named Agents of
Federal Bureau of Narcotics, 403 U.S. 388 (1971). In Bivens,
the Court held that damages may be obtained for injuries resulting from
a violation of the Fourth Amendment by federal officials.
This argument is unavailing because this Court has held that a Bivens
claim seeking monetary damages cannot be brought for actions arising out
of the collection of taxes. See Fishburn v. Brown [ 97-2
USTC ¶50,742], 125 F.3d 979, 982-83 (6th Cir. 1997); accord
Downie, 301 F.3d at 695 (citing Fishburn for the proposition
that a taxpayer cannot bring a Bivens action against IRS agents
for Fourth Amendment violations).
Sachs contends that Fishburn should not be read as a blanket
prohibition against claims for monetary damages for actions out of the
collection of taxes. Rather. he asserts that Fishburn only
precludes Bivens actions that should have been part of a §7433
claim. There is no basis for such a reading of Fishburn.
This Court has previously stated explicitly and unequivocally that
taxpayers cannot "bring a Bivens action against IRS agents
for violations of [their] Fourth Amendment rights." Downie.
301 F.3d at 695. Section
7433 provides that it shall be the "exclusive remedy for
recovering damages from such actions." 26 U.S.C. §7433(a).
"Although the damages provision does not mention constitutional
violations, [this Court] noted that `[t]hese carefully crafted
legislative remedies confirm that, in the politically sensitive realm of
taxation, Congress's refusal to permit unrestricted damages actions by
taxpayers has not been inadvertent." Downie, 301 F.3d at 695
(quoting Fishburn [ 97-2
USTC ¶50,742], 125 F.3d at 983).
Thus, because Bivens actions are not available to taxpayers
claiming violations of the Fourth Amendment, Sachs's Bivens
theory is not a valid claim for which relief may be granted.
Because none of the theories provided by Sachs is legally viable, the
district court's dismissal of his Fourth Amendment claim under 12(b)(6)
In addition, we are not persuaded by any of the other arguments asserted
by Sachs on this appeal. First, Sachs argues that he possesses an
actionable claim under 26 U.S.C. §7433(a)
because the IRS did not possess a valid federal tax lien. However, the
IRS did possess a valid lien, statutorily imposed pursuant to 26 U.S.C. §6321.
Moreover, a valid federal lien is not required for the IRS to levy
property under 26 U.S.C. §6331.
Sachs also contends that the IRS issued an improper summons because the
summons was not sent by certified mail, and the summons did not provide
ten-day notice. This argument is unavailing because these requirements
apply to summonses issued for the purpose of ascertaining the
correctness of a return, making a return, or determining a tax liability
pursuant to 26 U.S.C. §7602.
The summons in question here, however, was issued for the purpose of
collection or seizure pursuant to 26 U.S.C. §6333,
and the certified mailing and notice requirements therefore do not
Next, Sachs asserts that the IRS failed to adequately notify Sachs of
the seizure. Pursuant to 26 U.S.C. §6335,
the IRS was only required to provide a notice of seizure to Q&R, and
it properly did so.
Lastly, Sachs argues that the levy on the assets held by Q&R was
improper because the statute of limitations had expired. The period
during which a tax may be collected is extended if a court proceeding is
filed, and the time period shall not lapse until the liability for the
tax is satisfied. See 26 U.S.C. §6502(a).
Because the IRS brought suit against Sachs prior to the expiration date
of the collection statute, the deadline was extended.
For the foregoing reasons, we AFFIRM
the judgment of the district court.