Snyder v. United States

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
1-15-2008
Snyder v. USA
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-2106
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 07-2106
___________
RICHARD SNYDER;
MARION SNYDER,
Appellants
v.
UNITED STATES OF AMERICA
c/o Internal Revenue Service
________________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 04-cv-00005)
District Judge: Honorable Gregory M. Sleet
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
December 26, 2007
Before: RENDELL, JORDAN and GARTH, Circuit Judges
(Opinion filed: January 15, 2008)
___________
OPINION
___________
PER CURIAM
Richard Snyder and Marion Snyder appeal, pro se, from the order of the United
States District Court for the District of Delaware granting summary judgment in favor of
the Appellee United States of America c/o Internal Revenue Service (hereinafter “IRS”)
as to Appellants’ claims and denying leave to amend the complaint. We will affirm.
I.
This appeal arises out of tax liens entered by the IRS against Appellants’
properties in connection with their 1988 income tax return. Although Appellants had
filed the requisite Schedule A for their claimed deductions, it appears that the IRS mislaid
the document. Believing that the supporting schedule had never been submitted, the IRS
concluded that there was a mathematical error in Appellants’ 1988 return. Such an
alleged error allowed the IRS to use its summary assessment procedures and assess the
tax liability without first furnishing Appellants with a notice of deficiency. See, e.g.,
I.R.C. §§ 6213(b)(1), (2). The IRS accordingly issued a correction notice and filed liens
on Appellants’ Washington, D.C. and Maryland properties. On or about June 30, 1998,
Appellants’ attorney submitted to the IRS a lien release request pursuant to Treas. Reg. §
401.6325, referring specifically to the Washington, D.C. lien. The IRS expressly denied
this request by letter dated September 3, 1998. Over time, Appellants have filed
additional pro se requests with the IRS, which frequently stated their intent to seek
judicial relief and damages.
On March 15, 1999, Appellants filed a voluntary petition under Chapter 13 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland.
Appellants then commenced an adversary proceeding against the IRS, requesting a
determination of their individual income tax liabilities for 1988 and 1989. The
bankruptcy court orally ruled on the impropriety of the assessment process and the
2
resulting liens at a May 14, 2001 hearing. It subsequently entered written orders on July
20, 2001 and April 18, 2003. In essence, the bankruptcy court found that Appellants had
in fact filed a Schedule A with their 1988 tax return and that the “mathematical or clerical
error” exception to the notice of deficiency requirement was therefore inapplicable. It
accordingly concluded “that the assessment for 1988 . . . is improper and is to be abated
and the corresponding liens released.” Snyder v. United States, No. 99-53312 SD, ADV
99-5583 SD, 2003 WL 21224785, at *1 (Bankr. D. Md. Apr. 18, 2003). Both Appellants
and the IRS appealed to the United States District Court for the District of Maryland,
which disposed of the appeals on September 30, 2005. Snyder v. IRS, 337 B.R. 542 (D.
Md. 2005). The Maryland district court affirmed the ruling by the bankruptcy court with
respect to the IRS’s failure to comply with the applicable deficiency notice requirement.
However, it reversed the bankruptcy court’s determination to void the liens only, agreeing
with Appellants that the 1988 tax assessment should also be voided. Deciding not to
appeal the Maryland district court’s ruling, the IRS released the liens on January 23,
2006.
On January 5, 2004, Appellants filed a civil complaint with the District Court,
seeking damages pursuant to I.R.C. § 7432 for the IRS’s failure to release the liens. They
specifically alleged that such a release had not occurred even though the bankruptcy court
invalidated the liens in its May 14, 2001 ruling. The District Court granted the IRS’s
motion to dismiss as to the § 7432 claim on April 11, 2005, determining that it was time-
barred pursuant to the applicable two-year statute of limitations. The District Court
3
further granted Appellants’ motion to amend their complaint to assert a claim to quiet title
under 28 U.S.C. § 2410.
Appellants then submitted a motion to reinstate their § 7432 claim based on the
September 30, 2005 decision by the district court in Maryland. They essentially admitted
that their original complaint was premature because there was no final judicial ruling
voiding the liens until September 30, 2005. The District Court reinstated the § 7432
claim on March 31, 2006 due to the IRS’s “inexplicab[le]” failure to respond to
Appellants’ motion. (Supp. App. at 16 (3/31/06 Order).)
After this reinstatement, the parties cross-moved for summary judgment.
Appellants moved for a trial and also filed a document entitled an “amended complaint,”
which was docketed as a motion to amend or correct. In an order entered on February 13,
2007, the District Court granted summary judgment to the IRS and denied Appellants’
motions for summary judgment, trial, and leave to amend. It specifically found that the
quiet-title claim under § 2410 was now moot because the IRS had already released the
liens and that the § 7432 damages claim was time-barred for the reasons provided in its
April 11, 2005 memorandum and order. It further denied the motion to amend.
Appellants filed a timely notice of appeal.1
1
In addition to the appellate briefs of the parties, we have before us a supplemental
filing by the Appellants entitled an “Amended Informal Brief.” This document was
received but not filed by the Clerk on August 15, 2007. The Clerk sent Appellants a
noncompliance letter dated August 22, 2007, requesting that they submit a motion to file
this brief. No such motion has been received.
4
II.
On this appeal, we are not directly concerned with the validity and propriety of the
tax liens entered against Appellants’ property and since released by the IRS in January
2006. In fact, the IRS does not contest the judicial findings by the Maryland district court
that “the IRS improperly assessed the [Appellants’] 1988 tax” and that the resulting liens
were therefore void and unenforceable. (Appellee’s Br. at 4-5 (citing Snyder, 337 B.R. at
544).) Instead, we must decide whether the District Court was correct to grant summary
judgment to the IRS on the grounds that it could provide no further relief as to
Appellants’ quiet-title claim given the release of the liens and that their damages claim
was time-barred. We conclude that the District Court was in fact correct.2
28 U.S.C. § 2410(a) states in relevant part that “the United States may be named a
party in any civil action or suit in any district court, or in any State court having
jurisdiction of the subject matter – (1) to quiet title to . . . . real or personal property on
which the United States has or claims a mortgage or other lien.” We have held that the
release of liens after the civil action itself was commenced does not strip a federal court
of the subject matter jurisdiction it otherwise possessed. See, e.g., Kabakjian v. United
States, 267 F.3d 208, 212 (3d Cir. 2001) (citing Kulawy, 917 F.2d 729, 733-34 (2d Cir.
2
We exercise appellate jurisdiction pursuant to 28 U.S.C. § 1291. Our review of a
summary judgment ruling is plenary. See, e.g., Cardenas v. Massey, 269 F.3d 251, 254
(3d Cir. 2001). Summary judgment is appropriate where here is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. See, e.g.,
Fed. R. Civ. P. 56(c); Cardenas, 269 F.3d at 254.
5
1990)). While acknowledging that it still had jurisdiction, the District Court nevertheless
considered the quiet-title action moot because the IRS had released the liens on January
23, 2006. As it noted, “only equitable relief affecting title, and not damages, may be
awarded” in a § 7410 action. Kulawy, 917 F.2d at 736. Appellants themselves
acknowledge as much, asserting that they actually sought damages under I.R.C. § 7432.
Once the IRS released the liens, the District Court could provide no other relief to
Appellants with respect to their § 2410 quiet-title claim. Accordingly, it had no choice
but to grant summary judgment to the IRS as to this claim.3
Unlike the quiet-title provision, I.R.C. § 7432 expressly authorizes an award of
monetary damages. This statute provides that, “[i]f any officer or employee of the
Internal Revenue Service knowingly, or by reason of negligence, fails to release a lien
under section 6325 on property of the taxpayer, such taxpayer may bring a civil action for
damages against the United States in a district court of the United States.” I.R.C. §
7432(a). I.R.C. § 6325(a)(1) requires that “the Secretary shall issue a certificate of
release of any lien . . . not later than 30 days after the day on which . . . the Secretary finds
that liability for the amount assessed, together with all interest in respect thereof, . . . has
3
The lack of any possible relief under § 2410 therefore distinguishes this case from
the prior decisions cited by Appellants. In these prior decisions, the IRS had actually
seized and sold the properties in question, and the taxpayers accordingly requested that
the district court void both the seizures and the subsequent transfers to third parties. See
Kabakjian, 267 F.3d at 209-10, 213; Aqua Bar & Lounge, Inc. v. United States, 539 F.2d
935, 935 (3d Cir. 1976). In this case, the IRS never seized nor sold Appellants’ property,
which they now appear to hold free and clear of any federal property interest.
6
become legally unenforceable.” In turn, the applicable Treasury regulation states that
such a finding of unenforceability “is treated as made on the earlier of:”
(1) The date on which the district director of the district in which the
taxpayer currently resides or the district in which the lien was filed finds . . .
legal unenforceability; or
(2) The date on which such district director receives a request for a
certificate of release of lien in accordance with [Treas. Reg.] § 401.6325-
1(f), together with any information which is reasonably necessary for the
district director to conclude that the lien . . . is legally unenforceable.
Treas. Reg. § 301.7432-1(b). I.R.C. § 7432 contains its own statute of limitations,
mandating that any action “be brought only within 2 years after the date the right of
action accrues.” I.R.C. § 7432(d)(3). Accrual under this provision occurs when the
taxpayer has “had a reasonable opportunity to discover all essential elements of a possible
cause of action.” Treas. Reg. § 301.7432-1(i).
The District Court applied this statute of limitations to find that Appellants’ cause
of action was time-barred. Based on the original complaint’s allegations and the IRS’s
motion to dismiss, the District Court found in its April 11, 2005 memorandum and order
that Appellants’ § 7432 claim “accrued when the bankruptcy court voided the liens on
May 14, 2001.” (Supp. App. at 6 (4/11/05 Mem.).) After reinstating the damages claim,
the District Court rejected it again on the same grounds. On appeal, the IRS argues for
the first time that the claim actually accrued even earlier, specifically on July 31, 1998.
On or about June 30, 1998, Appellants, through counsel, submitted a lien release request
to the IRS. Pursuant to Treas. Reg. § 301.7432-1(b), the IRS is treated as having found
that the underlying liability was unenforceable on the same date. The IRS argues that it
7
then had 30 days in which to release the lien, with any § 7432 claim for failure to do so
accruing on the 31st day, or, in this case, on July 31, 1998. Regardless of whether the
IRS’s theory of accrual is correct under the applicable statutory and regulatory language,
the action itself was untimely even based on the accrual date expressly chosen by the
District Court, because the complaint was not filed within two years of the May 14, 2001
oral ruling.
In any case, we do reject Appellants’s assertion that their cause of action did not
accrue until the Maryland district court issued its September 30, 2005 ruling determining
that the liens and the underlying tax assessment were both void.4 Given the governing
statutory and regulatory framework, a taxpayer need not wait till a court enters a final
order invalidating either the tax lien or the underlying tax liability before bringing suit
under § 7432. On the contrary, § 6325(a) refers to the Secretary’s finding of
unenforceability. There was no genuine issue of material fact as to Appellants having “a
reasonable opportunity to discover all essential elements of a possible cause of action”
before September 30, 2005. Treas. Reg. § 301.7432-1(i). Prior to this date, they filed
numerous submissions challenging the liens with the District Court, the federal courts in
Maryland, and the IRS itself. In fact, Appellants did not wait for an allegedly final
4
Appellants have also pointed to other alleged “accrual dates,” such as the IRS’s
alleged “secret” removal on February 22, 1999 of the penalty for late filing. Under the
statutory and regulatory framework governing accrual, Appellants’ assertions appear to
lack merit. Furthermore, even if their claim did in fact accrue in February 1999, their
complaint would still have been untimely.
8
judicial order, commencing this current action more than a year and a half before the
Maryland district court ruling.
Therefore, the two-year statute of limitations bars Appellants’ § 7432 claim.
Appellants argue that they are entitled to relief from the limitations period based on such
grounds as equitable tolling, fraudulent concealment, and equitable estoppel. They point
to a variety of alleged acts of misconduct by the IRS and its attorneys, including their
conduct in the Maryland bankruptcy proceedings. Even if true, such admittedly troubling
acts did not mislead Appellants as to their own damages claim or otherwise prevent them
from filing suit in a timely fashion. See, e.g., Young v. United States, 535 U.S. 43, 50
(2002); United States v. Beggerly, 524 U.S. 38, 49 (1999) (Stevens, J., concurring). In
fact, Appellants demonstrated they had sufficient knowledge and capacity to file a timely
lawsuit by submitting various administrative filings, including their June 1998
administrative request for a lien release.
We also must reject Appellants’ passing reference to the continuing violation
doctrine. The alleged conduct of the IRS in this case appear to constitute discrete acts,
which fall outside the scope of this doctrine. See, e.g., Cowell v. Palmer, 263 F.3d 286,
291-95 (3d Cir. 2001); Dziura v. United States, 168 F.3d 581, 583 (1st Cir. 1999).
Finally, the District Court properly denied leave to amend the complaint with
respect to new claims under I.R.C. §§ 7430 and 7433. Appellants apparently argue that
they had already alleged these two statutory claims in their pleadings. This is incorrect
because no properly filed pleading contained these claims, and the District Court itself
9
never granted Appellants leave to raise them. As noted by the District Court, Appellants
did not specifically request permission to add these causes of action. For instance, their
self-styled “amended complaint,” filed on the District Court docket as a motion to amend,
merely reiterated their arguments with respect to the then-pending claims under §§ 2410
and 7432, without making any reference to either § 7430 or § 7433. In their various
District Court filings, Appellants made, at best, isolated and passing references to these
two statutory provisions, in contrast to their invocation of § 7432 and their successful
motion to add a quiet-title claim under § 2410. In these circumstances, the District Court
committed no error in denying leave to amend.5
III.
For the foregoing reasons, we conclude that the District Court correctly granted
summary judgment to the IRS as to Appellants’ quiet-title and damages claims and
properly denied leave to amend. Therefore, we will affirm.
5
Furthermore, it appears that any amendment would have been futile because
Appellants did not have a viable cause of action under either statutory provision. See,
e.g., Foman v. Davis, 371 U.S. 178, 182 (1962). Because Appellants were not successful
in this litigation, they cannot be considered “prevailing parties” under § 7430. § 7433,
authorizing damages claims on account of unlawful collection actions, contains its own
two-year statute of limitations. See I.R.C. § 7433(d)(3). Accordingly, the District Court
correctly found that any § 7433 claim would be time-barred “under the same analysis” it
used to dispose of Appellants’ § 7432 cause of action. (2/13/07 Order at 4 n.4.)
10