United States v. John Zarra, Jr. , 477 F. App'x 859 ( 2012 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 11-3622
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UNITED STATES OF AMERICA
v.
JOHN ZARRA; MARSHA ZARRA,
Appellants
v.
J.P. MORGAN CHASE & CO.; CITIZENS FINANCIAL GROUP, INC.
_____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
District Court No. 2-10-cv-00811
District Judge: The Honorable Joy Flowers Conti
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
April 17, 2012
Before: SCIRICA, AMBRO, and SMITH, Circuit Judges
(Opinion filed: April 19, 2012)
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OPINION
_____________________
SMITH, Circuit Judge.
Defendants John and Marsha Zarra (collectively, “the Zarras”) appeal from
an order of the District Court granting summary judgment in favor of Plaintiff
United States of America (the “Government”). We will affirm.
In April 2000, the Zarras timely filed their taxes for the year 1999, attaching
a check made out to the Internal Revenue Service (“IRS”) in the amount of
$179,501. This was the correct amount of their liability for 1999. For some
unexplained reason, however, only $179.50 was actually transferred to the IRS
from the Zarras’ account. The Zarras noticed the error, but did not submit a check
to pay the residual amount owed. On July 3, 2000, the Secretary of the Treasury
made an assessment against the Zarras for the residual amount owed from the 1999
tax year, plus penalties and interest. Less than ten years after the assessment, on
June 14, 2010, the Government filed a civil suit against the Zarras seeking the
amount assessed in July 2000 under 26 U.S.C. § 7403(a).
On February 25, 2011, the Government filed a motion for summary
judgment in its favor, arguing that no rational trier of fact could conclude that the
Zarras had already satisfied their tax obligation, and that the Zarras could not
properly assert any affirmative defenses. On June 30, 2011, the Zarras filed a
cross-motion for summary judgment, arguing in part that the Government’s
complaint should be dismissed because: (1) the Government provided insufficient
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evidence to establish that the assessment was made on July 3, 2000, and thus could
not establish that the complaint was filed within ten years of the assessment as
required by 26 U.S.C. § 6502(a)(1); and (2) the Zarras discharged their obligations
when they submitted the check in the correct amount and are thus no longer liable
for the residual that was not transferred. On August 26, 2011, the District Court
denied the Zarras’ cross-motion for summary judgment, and granted summary
judgment in favor of the Government.
The Zarras timely appealed the District Court’s judgment, and renewed both
of their above-listed arguments. We review the District Court’s judgment de novo,
“and will affirm only if ‘there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.’” Mabey Bridge & Shore, Inc. v.
Schoch, 666 F.3d 862, 867 (3d Cir. 2012) (quoting Fed. R. Civ. P. 56(a)). 1
First, the Government clearly provided evidence sufficient to establish that
the relevant tax was assessed on July 3, 2000, and thus that their complaint was
timely. The Government presented an IRS Form 4340 documenting the owed
taxes as well as the July 3, 2000, assessment date. This document is “presumptive
proof of a valid assessment.” Geiselman v. United States, 961 F.2d 1, 6 (1st Cir.
1992) (quoting United States v. Chila, 871 F.3d 1015, 1018 (11th Cir. 1989)). The
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The District Court had jurisdiction under 26 U.S.C. § 7402 and 28 U.S.C. §§
1331, 1340 & 1345. We have jurisdiction over this appeal under 28 U.S.C. § 1291.
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Zarras have not undermined this presumptive proof in any way—the fact that the
District Court asked for additional proof during the summary judgment hearing
does not mean that the Form 4340 was insufficient to establish the date of
assessment as a matter of law. 2 As a result, the Zarras have not raised a genuine
issue of fact as to whether the Government’s complaint was filed within ten years
of the tax assessment as required by § 6502(a)(1).
Second, the Zarras argue that they discharged their obligation when they
submitted a check to the IRS in the correct amount. The Internal Revenue Code
provides that a taxpayer remains liable to the Government “[i]f a check . . . is not
duly paid, or is paid and is subsequently charged back to the Secretary . . . .” 26
U.S.C. § 6311(b). A check is “duly paid” if it is paid “in a proper way, or
regularly, or according to law.” Robertson v. Perkins, 129 U.S. 233, 236 (1889).
The Zarras argue that, under Pennsylvania law, their check was “duly paid” in the
2
We reject the Zarras’ argument that the Government was required to produce a
summary record of assessment signed by an assessment officer in order to prove
the date of assessment. See Geiselman, 961 F.2d at 6 (rejecting a similar argument
as “fall[ing] beneath the weight of authority”). Even if such a summary record
were required, however, the Government satisfied the requirement by introducing
Form RACS 006—a computer-generated summary record of assessments made at
a particular branch office that is signed by an assessment officer, as required by
Treasury Regulation § 301.6203-1. The Government’s witness, Sandra Mikkelsen,
clearly linked the proffered Form RACS 006 to the Form 4340 listing the Zarras’
July 3, 2000, assessment. Nonetheless, we hold that this evidence was not
necessary to establish the date of assessment because Form 4340 is presumptive
proof of an assessment, and because the Zarras have not undermined that proof in
any way. See Geiselman, 961 F.2d at 6.
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correct amount, and that they are therefore not liable for the uncredited portion of
the check. Assuming, without deciding, that Pennsylvania law governs whether
their check was “duly paid” within the meaning of § 6311(b), we agree with the
Government that the Zarras mischaracterize Pennsylvania law.
Under Pennsylvania law, “payment by check constitutes a conditional
payment.” Romain v. Workers’ Comp. App. Bd., 901 A.2d 477, 482 (Pa. 2006).
“The condition of the payment is not accomplished until payment of the monetary
funds is actually received. . . . [I]f the transfer of funds never occurs, then payment
is never made.” Barrett v. Workers’ Comp. App. Bd., 989 A.2d 396, 399 (Pa.
Commw. Ct. 2009) (citing Romain, 901 A.2d at 482). Here, the Zarras made a
conditional payment to the IRS in the correct amount of $179,501. Only $179.50,
however, was actually transferred to the IRS. There is no dispute as to these facts.
As a result, under Pennsylvania law, payment of the residual liability “[wa]s never
made.” Id. A tax that is never paid cannot be duly paid; the Zarras thus have not
discharged their obligation, and remain liable under § 6311(b) for the amount
assessed, as a matter of law.
Accordingly, we will affirm the District Court’s grant of summary judgment
in favor of the Government.
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