INTERNAL REVENUE SERVICEv.KOFF

United States District Court, E.D. CaliforniaMar 1, 2002
No. CIV.S-00-1954 LKK DAD PS (E.D. Cal. Mar. 1, 2002)

No. CIV.S-00-1954 LKK DAD PS

March 1, 2002


ORDER AND FINDINGS AND RECOMMENDATIONS


DALE A. DROZD, United States Magistrate Judge

Pursuant to Local Rule 72-302(c)(21) this action was referred to the undersigned for all purposes encompassed by that provision. The matter came before the court for hearing on plaintiff's motion for summary judgment. Norma J. Schrock of the U.S. Department of Justice, Tax Division, appeared on behalf of plaintiff. Defendant Darline Koff, proceeding pro se, appeared on her own behalf. Having considered all written materials submitted with respect to the motion and after hearing oral argument, the court took the motion under submission. For the reasons stated below, the undersigned recommends that plaintiff's motion be granted in part.

Defendant Koff objected to the undersigned hearing the motion given her lack of consent to Magistrate Judge jurisdiction. At the hearing on the motion the court overruled the objection, explaining to Ms. Koff that the referral under Local Rule 72-302(c)(21) meant only that the undersigned would issue findings and recommendations subject to de novo review by the assigned district judge.

BACKGROUND

The United States filed a properly signed complaint on September 20, 2000, seeking to reduce to judgment a federal tax assessment against defendant Darline Koff. Specifically, the United States alleged that on October 30, 1989, timely assessments were made against defendant Darline Koff for income taxes, penalties and interest for the tax years 1982 through 1985 and that she failed to make payment to the United States of the assessed amount of $198,774.94 plus accrued unassessed statutory additions and interest. It was also alleged that on June 30, 1992, defendant Koff and her husband filed a Chapter 7 bankruptcy petition and that the automatic stay imposed as a result remained in effect until the bankruptcy case was dismissed on November 20, 1992. The United States alleged that the statutory period for collection had therefore not yet expired at the time its complaint was filed.

Plaintiff originally filed on September 8, 2000, but that complaint was stricken from the record by order of the district court due to non-compliance with Local Rule 7-131 in that the complaint was not signed.

In their motion the United States at times erroneously refers to the date of assessment as October 20, 1989, although the complaint alleges, and the Certificates of Assessments (Schrock Decl., Exs. A-D) reflect, the correct date of October 30, 1989.

In moving for summary judgment the United States identifies the issue to be resolved as: (1) whether Darline Koff has unpaid tax liabilities for the years in question; and (2) whether this suit was commenced before expiration of the statute of limitations. The United States argues that Certificates of Assessments and Payments establish defendant Koff's tax liability absent evidence to the contrary. Next, the United States argues that pursuant to 26 U.S.C. § 6502 the statute of limitations for this action is ten years from the date of the tax assessment, in this case October 30, 1989. The complaint in this action was not filed until September of 2000. However, the United States argues that when defendant Koff and her husband filed their Chapter 7 bankruptcy petition on June 30, 1992, an automatic stay went into effect tolling the statute of limitations until six months after the stay was lifted, pursuant to 26 U.S.C. § 6503 (h). The United States asserts that defendant Koff's bankruptcy petition was discharged on November 20, 1992 and that when six additional months of tolling are added, the statute of limitations on this action would have expired on September 22, 2000, thus making this action timely.

Defendant Darline Koff opposes the motion for summary judgment on several grounds. First, she argues that the IRS Certificates of Assessments do not establish her tax liability as claimed by the government. In this regard, she relies primarily upon a computer printout obtained from an IRS Office on October 2, 2000, indicating that she has no outstanding tax liability. Next, defendant Koff claims that the ten year statute of limitations expired prior to the filing of this complaint. Finally, she argues that even if the government's tolling argument was otherwise persuasive, the government should not be awarded the benefit of the tolling provision because it continued to make collection efforts during the automatic stay.

After reviewing the applicable summary judgment standards the undersigned will address the arguments of the parties.

SUMMARY JUDGMENT STANDARDS

Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c);see also Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970); Owen v. Local No. 169, 971 F.2d 347, 355 (9th Cir. 1992).

The party moving for summary judgment

always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the `pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. Indeed, summary judgment should be entered, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. In such a circumstance, summary judgment should be granted, "so long as whatever is before the district court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323.

If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968); Ruffin v. County of Los Angeles, 607 F.2d 1276, 1280 (9th Cir. 1979), cert. denied, 455 U.S. 951 (1980).

In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Rule 56(e); Matsushita, 475 U.S. at 586 n. 11; see also First Nat'l Bank, 391 U.S. at 289; Strong v. France, 474 F.2d 747, 749 (9th Cir. 1973). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

In seeking to establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." First Nat'l Bank, 391 U.S. at 290; see also T.W. Elec. Serv., 809 F.2d at 631. Thus, the "purpose of summary judgment is to `pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587 (quoting Fed.R.Civ.P. 56(e) Advisory Committee's Note on 1963 amendments); see also Int'l Union of Bricklayers Allied Craftsman Local Union No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985).

In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Rule 56(c); see also SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982). The evidence of the opposing party is to be believed, Anderson, 477 U.S. at 255, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party, Matsushita, 475 U.S. at 587 (citing United States v. Diebold Inc., 369 U.S. 654, 655 (1962) (per curiam)); see also United States v. First Nat'l Bank of Circle, 652 F.2d 882, 887 (9th Cir. 1981). Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. See Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),aff'd, 810 F.2d 898, 902 (9th Cir. 1987). Moreover, a scintilla of evidence or evidence that is merely colorable or not significantly probative does not present a genuine issue of material fact precluding summary judgment. See Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000); Summers v. A. Teichert Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997).

Finally, to demonstrate a genuine issue, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 587 (citation omitted)

ANALYSIS

I. Defendant Koff's Tax Liability

The United States asserts that defendant Koff has unpaid tax assessments for the years 1982 through 1985. In support of this aspect of its summary judgment motion the United States has submitted Certificates of Assessments and Payments for each of the years in question. (Schrock Decl. Exs. A, B, C and D.) Defendant Koff opposes this aspect of the motion primarily on the basis of a computer printout which she allegedly obtained from IRS Officer Dottie Clark on October 2, 2000, reflecting no back tax liability. (Koff Decl. Ex. 5) Defendant Koff also objects to the Certificates of Assessments on the grounds that they are not supported by other documentation, appear to have been generated in the year 2000, rather than in 1989, and constitute hearsay. At the very least, she argues, a material issue of fact exists as to her tax liability for the years in question.

Defendant Koff refers to this computer printout as Exhibit 4 to her declaration. However, the original exhibits filed with the court appear to be misnumbered beginning at the tab for Exhibit 4, behind which there is no exhibit. In the copy of the exhibits filed with the original, the computer printout does appear behind the tab marked "Exhibit 4."

The United States responds by stating that the Certificates of Assessment are self-authenticating records that establish defendant's tax liability. Moreover, to the extent the computer generated form reflecting zero balances may be considered, the United States argues that it merely reflects a clerical error resulting from the IRS computer not being coded to reflect the timely filing of the complaint in this action. The government's arguments in this regard are persuasive.

"It is settled in this circuit that Certificates of Assessments and Payments are `probative evidence in and of themselves and, in the absence of contrary evidence, are sufficient to establish that . . . assessments were properly made.'" Koff v. United States, 3 F.3d 1297, 1298 (9th Cir. 1993) (citing United States v. Hughes, 953 F.2d 531, 535 (9th Cir. 1992)); see also Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993). Neither defendant's declaration nor the IRS computer printout she relies upon, to the extent it can be read, are sufficient to raise a genuine issue of material fact necessitating a trial.

The material fact is not whether defendant Koff had a back tax liability on October 2, 2000, when the printout was generated. Rather, the question is whether the unpaid amount was due and owing when the complaint in this action was filed. In any event, it appears clear that when the reflection of the assessments was removed from the IRS computer it was done so due to a programming error which did not reflect that this action was instituted to obtain a judgment prior to September 22, 2000. (Asvit Decl. at 2.) In her answer, defendant Koff asserts the statute of limitations as an affirmative defense to the complaint. It is thus apparent that defendant was aware of the assessments. Moreover, the computer printout generated at defendant's request on October 2, 2000, was not a tax abatement notice issued by the IRS. Even if it were an abatement, under the undisputed facts before the court, it would be one issued as a result of an accidental or unintended processing error that could be reinstated without prejudice to the taxpayer. Matter of Bugge, 99 F.3d 740, 745 n. 6 (5th Cir. 1996) (a tax abatement issued due to an accidental processing error caused by a computer system in transition was unauthorized and found ineffective); Crompton-Richmond Co. v. United States, 311 F. Supp. 1184, 1187 (S.D.N.Y. 1970); see also Kroyer v. United States, 55 F.2d 495, 499 (Ct.Cl. 1932).

The United States has met its burden of presenting valid assessments establishing defendant Koff's tax liability and is entitled to summary judgment in its favor on that issue.

II. The Statute of Limitations

The parties agree that under 26 U.S.C. § 6502 (a), the applicable statute of limitations for this action is ten years. The parties also agree that under 26 U.S.C. § 6503 (h) the statute of limitations was tolled by the automatic stay imposed when defendant Koff and her husband filed a Chapter 7 bankruptcy petition on June 30, 1992, until six months after the period during which the law prohibited collection. See In re Montoya, 965 F.2d 554, 556 n. 4 (7th Cir. 1992). The parties' dispute centers on the calculation of that period of tolling and, to a lesser extent, the precise calculation of dates during which the statute was running.

The United States contends that the ten year statute of limitations was tolled from the date the bankruptcy petition was filed (June 30, 1992) until six months after the date of discharge (November 20 1992). (See Schrock Decl., Ex. E.) Defendant Koff, argues on the other hand, that the statute was tolled only from the filing of the petition until six months after the date the adversary hearing involving defendant and the IRS was closed by order of the Bankruptcy Court (November 9, 1992). (See Koff Decl. Ex. 2.)

The automatic stay under 11 U.S.C. § 362 is activated immediately upon the filing of the bankruptcy petition and remains "in effect either until the entry of an order . . . granting or denying discharge or closing or dismissing the chapter [7] case, or until the entry of an order granting relief from stay pursuant to Bankruptcy Code § 362(d), (e), (f)." Interstate Commerce Commission v. Holmes Transportation, Inc., 931 F.2d 984, 987 (1st Cir. 1991). As the Ninth Circuit has stated:

Pursuant to 11 U.S.C. § 362 (c)(1), the automatic stay remains in force with respect to property of the estate "until such property is no longer property of the estate." So long as there are assets in the estate, then, the stay remains in effect . . . .
In re Spirtos, 221 F.3d 1079, 1081 (9th Cir. 2000) (quoting 3 Collier on Bankruptcy § 362.06(1) (15th ed.)).

Here, it is undisputed that Mr. and Mrs. Koff were released from all dischargeable debts by order filed in Bankruptcy Case Number 92-25781-B on November 20, 1992. (See Schrock Decl., Ex. E.) The statute of limitations was therefore tolled until six months after that date pursuant to 26 U.S.C. § 6503 (h). Defendant Koff's argument based upon the November 9, 1992, order closing the adversary proceeding in the case of Koff v. The United States and the State of California, Adversary No. 922318, is misplaced. The adversary proceeding is merely related to the underlying bankruptcy proceeding. They are not one in the same. Here, the discharge was granted on November 20, 1992. Thus, the statute was tolled from June 30, 1992, until six months after November 20, 1992.

Under Federal Rule of Civil Procedure 6(a), the statute of limitations began to run on the day following the making of the assessments. See Union National Bank v. Lamb, 337 U.S. 38, 40-41 (1949) (Rule 6(a) can apply to any applicable statute in the absence of contrary expression of policy); Burnet v. Willingham Loan Trust Co., 282 U.S. 437, 439 (1931) (stating the traditional rule that the day of the event that starts the statute of limitations period running is excluded from the computation of the limitations time period). The computation of the statute of limitations in this case, then, is as follows:

10/31/89 through 6/29/92 = 2 years, 243 days consumed

6/30/92 through 5/20/93 = tolled [324 days tolled]

5/21/93 through 9/20/00 = 7 years, 121 days consumed

Total consumed = 9 years 364 days

Accordingly, when plaintiff's complaint was file-stamped on September 20, 2000, it was timely, with at least one day remaining on the ten year statute of limitations. Moreover, although not argued by plaintiff United States, it would appear that this action was in fact "commenced" for statute of limitations purposes on September 8, 2000, when the unsigned complaint was filed with the court.

It would seem that this is one of a number of errors occurring throughout the government's handling of this matter. Even though the unsigned complaint was stricken and a signed complaint filed September 20, 2000, the September 8, 2000, filing nonetheless would appear to have commenced this action. See Fed.R.Civ.P. 3 ("A civil action is commenced by filing a complaint with the court."). See also Fed.R.Civ.P. 11 ("an unsigned paper shall be stricken unless omission of the signature is corrected promptly after being called to the attention of the attorney or party."); Local Rule 1-101 (13) (defining "filed" as "delivered into the custody of the Clerk and accepted by the Clerk for inclusion in the official records of the action.") Here, even though the complaint filed September 8, 2000, was stricken by order of the court, the Clerk accepted, placed it in the official record and opened the civil case file based upon it. Of course, if this action was commenced on September 8, 2000, it was within the statute of limitations by thirteen days.

Defendant Koff's remaining arguments in opposition to the motion for summary judgment lack merit. First, defendant argues that this action is barred by the statute of limitations even under plaintiff's tolling calculation because the action was not commenced until September 26, 2000. (Koff Decl., Ex. 6.) The court's own records establish the latest date on which this action was commenced as September 20, 2000. Defendant Koff mistakenly refers to a government file stamp on the complaint filed September 20, 2000, which reflects the date that the conformed copy of the complaint was received by plaintiff's counsel from the court.

Next, defendant Koff suggests that had the government complied with her request to produce all documents they rely upon in support of their complaint, she may have discovered evidence that would support her claims that the statute of limitations bars this action and that her tax liability has not been established. As discussed at the hearing on this motion, a motion to compel filed by defendant Koff on January 29, 2001, was dropped from calendar due to the parties' failure to file a joint discovery stipulation as required under Local Rule 37-251. Thereafter, defendant Koff did not pursue bringing the motion to compel before the court. Most importantly, defendant has not filed affidavits or otherwise made a showing under Federal Rule of Civil Procedure 56(f) that would justify a continuance of plaintiff's motion on this basis.

Finally, defendant Koff argues that plaintiff should not enjoy the benefits of the tolling of the statute of limitations based upon the automatic stay imposed upon the filing of bankruptcy pursuant to 11 U.S.C. § 362. Defendant's argument in this regard is predicated on her claim that the Internal Revenue Service (IRS) violated the automatic stay by continuing to engage in collection activities against she and her husband while their bankruptcy petition was pending. However, a violation of the automatic stay provision would not effect the tolling of the statute of limitations. Rather, actions taken in derogation of an automatic stay are either void or voidable. Soares v. Brockton Credit Union, 107 F.3d 969, 976 (1st Cir. 1997) (and cases cited therein). If collection actions were taken by the IRS in 1992 in violation of the automatic stay, the Koffs' remedy was to attempt to void those actions and seek return of the improperly collected amounts.

At the hearing, counsel for the United States conceded that is was possible that for a five week period after the filing of bankruptcy the IRS continued to take collection actions against the pension of Mr. Koff.

For all of these reasons the undersigned concludes that this action is not barred by the statute of laminations and plaintiff United States is entitled to judgment in its favor.

III. The Amount of the Judgment

In moving for summary judgment the United States sought a judgment against defendant Koff "in the amount of $198,774.94 plus all accrued interest and penalties allowable under law." (Mem. of P. A. in Supp. of Mot. for Summ. J. at 6.) Later, the United States suggested that the $198,774.94 figure did not "include accrued interest and penalties" that had not yet been assessed. (Reply at 2, fn. 5.) The United States indicated that additional time was needed to complete the exact calculations and that the government intended to file a declaration setting forth the balances due as of February 28, 2001, prior to the hearing on the motion. At that hearing, counsel for the United States made no mention of a supplemental declaration and the calculation of accrued interest and penalties was not discussed.

Unbeknownst to the court, on the day prior to the hearing the United States filed a declaration purportedly by Supervisory Revenue Officer Gerald Kinkade calculating defendant Koff's total outstanding tax liabilities for the years in question as of February 28, 2001, as follows:

1982: $350,293.67

1983: $111,309.97

1984: $ 62,482.61

1985: $ 21,822.65

Total $545,908.90

As indicated, these calculations were not discussed at the hearing on plaintiff's motion and the court was unaware that they had been submitted. The calculations were not mentioned by counsel for the government. Defendant Koff was not given the opportunity to respond to the calculations either in writing or at the hearing. To make matters worse, a review of the untimely-filed declaration reveals that it was not signed by Supervisory Revenue Officer Gerald Kinkade but by a "Mitsi Shine Acting for" the Supervisory Revenue Officer. (Kinkade Decl. at 3.)

Under these circumstances, the court will not consider the declaration. In the event these findings and recommendations are adopted, plaintiff will be ordered to file a properly supported motion for summary judgment addressing the issue of the amount of the judgment sought and shall properly notice that motion for hearing before the undersigned.

By order filed October 2, 2001, the undersigned vacated all remaining dates set forth in the Pretrial Scheduling Order of March 8, 2001, subject to rescheduling if necessary in light of the resolution of this pending motion.

CONCLUSION

For the reasons set forth above, IT IS HEREBY RECOMMENDED that plaintiff's motion for summary judgment be granted in part as indicated above.

In addition, IT IS HEREBY ORDERED that in the event these Findings and Recommendations are adopted by the assigned district judge following de novo review, plaintiff shall, within thirty (30) days of the date of such order, file a properly supported and noticed motion for summary judgment addressing the issue of the amount of the judgment sought.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636 (b)(1). Within ten (10) days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served and filed within five (5) days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. See Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

* * CERTIFICATE OF SERVICE * *

I, the undersigned, hereby certify that I am an employee in the Office of the Clerk, U.S. District Court, Eastern District of California.

That on March 1, 2002, I SERVED a true and correct copy(ies) of the attached, by placing said copy(ies) in a postage paid envelope addressed to the person(s) hereinafter listed, by depositing said envelope in the U.S. Mail, by placing said copy(ies) into an inter-office delivery receptacle located in the Clerk's office, or, pursuant to prior authorization by counsel, via facsimile.