Opinion
No. C03-5068 RBL, 03-CV-05068-ORD.
December 5, 2003
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on the parties' cross-motions for summary judgment. The Court has considered the pleadings filed in support of and in opposition to the motions, and the remainder of the file herein.
The parties are in agreement with the following statement of facts as recited in plaintiffs' motion:
The plaintiffs are residents of Pierce County, Washington. The plaintiffs brought suit against the United States of America for the recovery of federal income tax and interest wrongfully collected. The court has jurisdiction pursuant to 28 U.S.C. § 1346(a)(1).
Plaintiff Ian Michael Stead and his former spouse, Lynan K. Stead, filed a federal income tax return for the tax year 1994 with the Internal Revenue Service Center in Ogden, Utah in 1995. In September, 1996 $7,574.31 plus statutory additions remained unpaid with respect to the filed 1994 return.
On August 29, 1996 the Internal Revenue Service issued a Notice of Levy to First Interstate Bank regarding the amount remaining due and owing with respect to the 1994 federal income tax liability of Ian Michael Stead and Lynan K. Stead, which was $9,023.26.
The sum of $9,023.26 was removed from Ian and Lynan Stead's bank account by First Interstate Bank. The amount was never credited toward Ian and Lynan Stead's 1994 federal income tax liability.
Ian Michael Stead's Declaration filed in support of this motion indicates that $9,023.26 was never returned to him. The United States' position is that their records do not reflect the payment of the sum over to the Internal Revenue Service and therefore, the Steads are not entitled to have the $9,023.26 credited against their 1994 tax liability. The plaintiffs have no conclusive proof where the funds ended up, only that the funds were never returned.
The matter was eventually resolved to the Internal Revenue Service's satisfaction when the tax lien had to be released so Mr. Stead and his current wife could obtain a refinancing on their home. Internal Revenue Service records indicate a payment of $11,641.01.
Over the years, there was some attempt by the taxpayers to resolve the situation. Plaintiff Ian Michael Stead had had discussions with Mr. Hammer, an Internal Revenue Service Revenue Officer, in May, 1998 about the issue. Plaintiffs' counsel wrote several letters to the Internal Revenue Service on September 4, 1998, March, 2001, and November, 2001 to no avail in an attempt to clear the Steads' 1994 tax account, but the Internal Revenue Service failed to give credit for the funds removed from the bank account in 1996.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact which would preclude summary judgment as a matter of law. Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to present, by affidavits, depositions, answers to interrogatories, or admissions on file, "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). "The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient." Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995). Factual disputes whose resolution would not affect the outcome of the suit are irrelevant to the consideration of a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In other words, "summary judgment should be granted where the nonmoving party fails to offer evidence from which a reasonable jury could return a verdict in its favor." Triton Energy, 68 F.3d at 122.DISCUSSION
Plaintiffs seek a summary ruling that once $9,023.26 was removed from their First Interstate Bank account pursuant to a tax levy issued by the Internal Revenue Service, the funds were under constructive possession of the government and must be credited toward the tax that the levy was based upon. Plaintiffs argue that a levy issued under 26 U.S.C. § 6331 is "tantamount to a transfer of ownership," making the government responsible for the funds from the point of seizure. United States v. Sullivan, 333 F.2d 100, 116 (3rd Cir. 1964).
The United States contends that plaintiffs' reliance on Sullivan is misplaced based on the Third Circuit's more recent decision in Resolution Trust Corp. v. Gill, 960 F.2d 336 (3rd Cir. 1992). In Resolution Trust, the Third Circuit reversed itself on the issue of whether a levy pursuant to 26 U.S.C. § 6331 is "tantamount to a transfer of ownership." The Court stated as follows:
A properly executed levy does not automatically entitle the Government to taxpayer property. The administrative levy is a "provisional remedy;" it "does not determine whether the Government's rights to the seized property are superior to those of other claimants," National Bank, 472 U.S. at 721, 105 So. Ct. at 2924, nor does the levy "determine the ownership rights to the property," id. at 731, 105 S.Ct. at 2390. Resolution Trust Corp., 960 F.2d at 343.
The Court further explained in a footnote that:
Although this court has previously stated that "when validly invoked, [the administrative levy] effects a seizure of a delinquent's property tantamount to a transferral of ownership," United States v. Sullivan, 333 F.2d 100, 116 (3rd Cir. 1964), such an interpretation is clearly contrary to the Supreme Court's statements in National Bank; therefore we cannot, as the district court did, rely on it. See also Michael I. Saltzman, IRS Practice and Procedure, para. 14.12 at 14-69, (2d ed. 1991) (as a result of recent Supreme Court cases, "the statements of some courts that a levy effectively transfers a substantial interest in property amounting to ownership are no longer correct"). Resolution Trust Corp., 960 F.2d at 343 n. 8.
Based on the above caselaw, the Court finds that the government's issuance of a levy was not "tantamount to a transferral of ownership" and did not render the plaintiffs' tax liability paid. Having failed to produce any evidence as to where the funds ended up, it is impossible for plaintiffs to meet their burden of establishing the existence of an overpayment. As a result, plaintiffs' claim for a refund fails and summary judgment in favor of defendant is appropriate.
CONCLUSION
For all of the foregoing reasons, defendant's Motion for Summary Judgment (Dkt.#10) is GRANTED and plaintiffs' Motion for Summary Judgment (Dkt.#13) is DENIED.