Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-03042/USCOURTS-ca10-89-03042-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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... 

. FIL.BO 

Umted Sttk§ C-Oi,i.rr r,f Appeals 

Tenth Circuit 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

AUG 3 0 1990 

.ROBERT L. HOECK.ER 

Clerk 

LARRY M. SILVEY and CORAL L. SILVEY, ) 

) 

Plaintiffs-Appellants, ) 

) 

v. ) 

) 

INTERNAL REVENUE SERVICE; EDWARD M. ) 

CAVUTO; M. E. POSEY; CONNIE STUCKER; ) 

DONALD R. BERRY; CLARENCE M. KING, JR.; ) 

BEEF BELT FEEDERS, INC.; J. S. MUENCH; ) 

CRAIG DUFF; CHARLES DUFF; SHIRLEY ) 

STEFFENS; MARK KUHLMAN; Undersheriff; ) 

HOWARD HOFFMAN, ) 

) 

Defendants-Appellees. ) 

ORDER AND JUDGMENT * 

Nos. 89-3026 

89-3042 

89-3061 

& 

89-3193 

(D.C. No. 88-4229-R) 

( D. Kan.) 

Before SEYMOUR, BRORBY, and EBEL, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of these appeals. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. These cases are therefore ordered 

submitted without oral argument. 

In these four appeals, plaintiffs-appellants appeal orders of 

the federal district court entered on January 9, 1989, February 3, 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 1 
1989, February 24, 1989, and July 24, 1989, respectively. Since 

each of the first three notices of appeal (Nos. 89-3026, 89-3042, 

and 89-3061) was filed while a Rule 59 motion was pending that 

sought review of the order to which the notice of appeal applied, 

each notice was void and of no effect. See Fed. R. App. P. 

4(a)(4). Therefore, we must dismiss the first three appeals for 

lack of jurisdiction. 

The orders appealed in the first three appeals were all 

merged into the district court's final order of July 24, 1989, 

however, and plaintiffs properly perfected an appeal from that 

order. Therefore, we may consider in appeal No. 89-3193 the 

issues raised by plaintiffs with respect to all four orders of the 

district court recited above. 

Plaintiffs commenced the underlying action in state court to 

recover damages for and secure injunctive relief from the Internal 

Revenue Service's (IRS) attempt to levy on the wages due Mr. 

Silvey from his 

Plaintiffs sued 

several of its 

employer, Beef Belt Feeders, Inc. (BBF). 

the IRS and several of its employees, BBF and 

employees, as well as its counsel, and the 

undersheriff of Logan County, Kansas. Plaintiffs' primary grounds 

for relief were that plaintiffs did not owe any taxes because the 

payment of taxes is voluntary, that the IRS deprived them of due 

process by levying on the wages without first obtaining a court 

order, that the "notice(s) of levy" served on BBF did not 

constitute an actual levy and, therefore, BBF should not have 

complied with the notices over Mr. Silvey's objection, that Mrs. 

Silvey had a spousal interest in half of Mr. Silvey's wages which 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 2 
the IRS could not reach, and that the undersheriff should not have 

refused Mrs. Silvey's request to collect Mr. Silvey's wages from 

BBF. 

Within thirty days of service of the summons and complaint, 

the United States filed a petition to remove the action from state 

court to federal court. See 28 U.S.C. § 1446. The federal 

district court granted the petition, but plaintiffs continued to 

file pleadings and other documents with the state court and the 

latter continued to rule on some of those matters. On 

November 10, 1988, the state court held a hearing at which BBF 

sought and was granted permission to tender to the clerk of the 

court funds in the amount of the wages BBF believed were owed Mr. 

Silvey and were subject to the IRS levy. 

On January 9, 1989, the federal district court entered the 

first order at issue here, in which it overruled plaintiffs' 

objections to the removal of the action to federal court, declared 

all orders of the state court entered since the removal null and 

void, and required plaintiffs to file all documents in the federal 

court and to comply with federal procedural rules. On appeal, 

plaintiffs contend that the action should not have been removed to 

federal court because the federal defendants were in default and 

because no basis existed for federal jurisdiction. We disagree. 

Although the federal defendants did not file an answer in 

state court within twenty days of service of the summons and 

complaint, they did remove the action to federal court in a timely 

fashion and immediately moved for an extension of time in which to 

respond to the complaint. The federal court granted the extension 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 3 
and the federal defendants responded to the complaint within the 

extended period by filing a motion to substitute the United States 

for the IRS and the individual federal defendants, and to dismiss 

the action against the federal defendants o r , in the alternative, 

enter summary judgment in their favor. 

Under the circumstances, the federal court did not abuse its 

discretion in refusing to hold the federal defendants in default. 

See Taylor v. City of Ballwin, 859 F.2d 1330, 1332 (8th Cir. 

1988)(denial of motion for default judgment is reviewed under 

abuse of discretion standard). Furthermore, 28 U.S.C. § 1346 

provides a proper basis for federal jurisdiction over plaintiffs' 

action (suits against the United States for recovery of any 

internal-revenue tax alleged to have been erroneously assessed or 

collected) and the action was removable to federal district court 

pursuant to 28 U.S.C. § 1442(a)(l) (suits against officers or 

agencies of the United States on account of any right, title, or 

authority claimed under any Act of Congress for collection of 

revenue). Finally, contrary to plaintiffs' assertion, the federal 

district court is an Article III court, not an "administrative" or 

"legislative" court. U.S. Const. art. III,§ 1. Therefore, the 

district court did not err in permitting the action to be removed 

to federal court. 

On January 17, 1989, plaintiffs filed a notice of appeal from 

the district court's order of January 9, 1989, as well as a motion 

seeking reconsideration of that order. On February 1, 1989, 

plaintiffs filed a motion for leave to proceed in forma pauperis 

on appeal. 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 4 
On February 3, 1989, the district court entered the second 

order at issue here, which granted the motion of the United States 

for substitution and dismissal or summary judgment. Plaintiffs 

raise three main issues concerning this order on appeal. First, 

plaintiffs contend that they do not owe any taxes for the tax 

years at issue. As support for their contention, plaintiffs argue 

that they are "free born white sovereign citizens of Kansas," the 

payment of taxes is voluntary, and wages are not taxable as 

income. This court has rejected such arguments in the past. See 

United States v. Dawes, 874 F.2d 746, 750-51 (10th Cir.)("The 

contention that appellants are not taxpayers because they are 

'free born, white, preamble, sovereign, natural, individual common 

law "de jure" citizens of Kansas' is frivolous."), cert. denied, 

110 S. Ct. 284 (1989), writs of error coram nobis granted and 

convictions vacated on other grounds, 895 F.2d 1581 (10th Cir. 

1990); United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 

1986)(premise that taxes are voluntary is incorrect); United 

States v. Lawson, 670 F.2d 923, 925 (10th Cir. 1982)(argument that 

wages are not income is "specious"). 

Second, plaintiffs contend that the IRS could not levy on Mr. 

Silvey's wages without a prior court order. The IRS contended 

below that plaintiffs did not file tax returns for the years 

1982-1984, so the IRS calculated the amount of taxes due for those 

years and assessed the taxes against plaintiffs accordingly. See 

26 U.S.C. §§ 6020, 6203. The IRS also contended that it sent 

plaintiffs notice and demand for payment of the taxes due, and 

plaintiffs did not pay the taxes within ten days of such notice 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 5 
and demand. See 26 U.S.C. 

U.S.C. § 6331, the IRS was 

§ 6303. Therefore, pursuant to 26 

authorized to levy on any of 

plaintiffs' property that was not otherwise exempt from levy, 

without a prior court order. See In re Carlson, 580 F.2d 1365, 

1369 (10th Cir. 1978); Pawlowske v. Chrysler Corp., 623 F. Supp. 

569, 570-71 (N.D. Ill. 1985)(and cases cited therein), aff'd, 799 

F.2d 753 (7th Cir. 1986). 

Plaintiffs did not dispute any of the IRS's factual 

contentions, but did argue that the assessment which formed the 

basis for the levy was invalid because the IRS failed to furnish 

them with a copy of the assessment upon their request. See 26 

U.S.C. § 6203. Plaintiffs' argument is unavailing. The 

assessment of a tax by the IRS is presumed to be correct and the 

taxpayer bears the burden of rebutting this presumption. See 

Moulton v. Commissioner, 733 F.2d 734, 735 (10th Cir. 1984); 

Christensen v. United States, 733 F. Supp. 844, 851-52 (D. N.J. 

1990). Furthermore, a presumption of regularity attaches to the 

actions of the IRS. See Borg-Warner Corp. v. Commissioner, 660 

F.2d 324, 330 (7th Cir. 1981); Christensen, 733 F. Supp. at 852. 

The "(m]ere failure (of the IRS] to provide the taxpayers with a 

copy of the record of assessment does not rebut the presumption 

that the IRS acted according to its regular procedures," and does 

not invalidate the levy. Christensen, 733 F. Supp. at 852. 

Third, plaintiffs contend that Mrs. Silvey, as a spouse, had 

an interest in half of Mr. Silvey's wages that the IRS could not 

reach by levy. This argument is without merit. The IRS had the 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 6 
right to levy upon the salary or wages of Mr. Silvey to satisfy 

any unpaid tax owed by him. See 26 u.s.c. § 6331. 

To the extent plaintiffs' other arguments concern the 

district court's order of February 3, 1989, we find them 

unpersuasive. 

On February 13, 1989, plaintiffs filed a motion to reconsider 

the court's order of February 3, 1989. On February 21, 1989, 

while that motion was pending, plaintiffs filed a notice of appeal 

concerning the order of February 3, 1989, as well as a motion for 

leave to proceed in forma pauperis on appeal. On February 24, 

1989, the court entered orders denying plaintiffs' motions to 

reconsider the orders of January 9, 1989, and February 3, 1989, 

respectively. The court also entered orders denying both of 

plaintiffs' motions for leave to proceed in forma pauperis on 

appeal. On appeal to this court, plaintiffs challenge only the 

district court's denial of in forma pauperis status for appeal 

Nos. 89-3026 and 89-3042. Since both of those appeals were 

invalid, see Fed. R. App. P. 4(a)(4), and since plaintiffs paid 

the filing fee in the fourth appeal, which was valid, plaintiffs' 

arguments regarding the district court's orders of February 24, 

1989, are moot. 

After dismissing the federal defendants from the action, the 

federal district court retained jurisdiction over the nonfederal 

defendants and ordered them to respond to plaintiffs' motion for 

injunctive relief concerning the funds held in the registry of the 

state court. Plaintiffs sought to have those funds returned to 

them. Both the nonfederal defendants and the United States, as 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 7 
well as plaintiffs, filed memoranda concerning the proper 

disposition of the funds. 

On July 13, 1989, the district court held a hearing at which 

the interested parties discussed the proper disposition of the 

funds. BBF, its employees, and counsel also made an oral motion 

for dismissal of plaintiffs' claims against them, which the court 

took under advisement. Plaintiffs contended at the hearing that 

the IRS had served a release of levy on BBF on December 12, 1989, 

which extinguished or otherwise satisfied plaintiffs' tax 

liability, so plaintiffs were entitled to the funds held in the 

registry of the state court. The United States argued that the 

release did not constitute or reflect satisfaction of plaintiffs' 

tax liability; rather, the release was served on BBF only because 

it no longer held any funds 

deposited them in the state court. 

that the district court order 

subject to the levy since it had 

The United States recommended 

the state court to disburse the 

funds to BBF so that BBF could surrender the funds to the IRS in 

accordance with the prior levy. 

In its order of July 24, 1989, the district court adopted the 

recommendation of the United States. The court ordered that the 

state court return the funds to BBF, that BBF meet with the IRS to 

determine what portion of the funds, if any, was exempt from levy, 

and that BBF pay the nonexempt portion to the IRS and pay the 

exempt portion to plaintiffs. The court further held that 

plaintiffs were not entitled to any wages levied upon by the IRS 

and BBF was not liable to plaintiffs for those wages, that 

plaintiffs had not stated a claim for relief against any of the 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 8 
nonfederal defendants, and that Mrs. Silvey did not have an 

independent right to the wages that was greater than that of the 

IRS. Finally, the court rejected plaintiffs' arguments based on 

failure to send notice of assessment, absence of due process, 

failure to file a timely response, release of levy, and 

jurisdictional deficiency. The court directed plaintiffs to bring 

in state court any claim they might have against BBF for the 

nonpayment of any wages other than those at issue here. 

Plaintiffs raise several arguments with respect to the funds 

BBF deposited in the state court. First, plaintiffs argue that 

BBF did not have the right to withhold Mr. Silvey's wages based 

solely on a "notice of levy." We disagree. The Treasury 

regulations provide that the IRS may levy upon a delinquent 

taxpayers' property "by serving a notice of levy on any person in 

possession of, or obligated with respect to, property or rights to 

property subject to levy, including ... salaries, wages, 

commissions, or other compensation." 26 C.F.R. 

§ 301.6331-l(a)(l). Furthermore, the Treasury regulations require 

that "any person in possession of (or obligated with respect to) 

property or rights to property subject to levy and upon which a 

levy has been made shall, upon demand of the district director, 

surrender the property or rights ... to the district director 

11 Id. at§ 301.6332-l(a)(l). 

Thus, BBF was obligated to withhold those wages of Mr. Silvey 

that were subject to the "notice(s) of levy" served upon BBF by 

the IRS and, upon demand of the IRS, surrender those wages to the 

IRS. Had BBF refused to comply with the aforementioned 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 9 
requirements, it would have been personally liable to the IRS for 

the amount of the wages and could have been subject to an 

additional penalty. See id. at§ 301.6332-l(b)(l) and (2). 

Second, plaintiffs argue that BBF's counsel violated their 

rights by tendering the amount of the wages to the state court 

after the case was removed to federal court, and that the state 

court violated plaintiffs' rights by retaining the money without 

any evidence that it was owed the IRS. We cannot review the 

propriety of BBF's actions in state court or of the state court's 

actions, themselves. We do note, however, that plaintiffs were 

the ones who continued to invoke the jurisdiction of the state 

court after the case was removed to federal court and that 

plaintiffs represented to the state court that only the claims 

against the federal defendants were under the jurisdiction of the 

federal court, thus leading the state court to believe that it 

retained jurisdiction over the claims against BBF and the other 

nonfederal defendants. 

Third, plaintiffs contend that because the IRS served a 

release of levy on BBF on December 17, 1988, the federal district 

court's order directing the funds to be returned to BBF and then 

surrendered to the IRS was in error. We disagree. Although the 

IRS released the levy before it actually obtained possession of 

the funds, the fact remained that the taxes were owed and that the 

IRS was authorized by statute to satisfy the tax obligation, to 

the extent possible, out of the funds held by the state court. 

Therefore, the district court's order simply effectuated the 

transfer of funds subject to levy from BBF to the IRS that would 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 10 
have occurred absent plaintiffs' commencement of the underlying 

lawsuit. Since the district court ordered BBF to give the IRS the 

nonexempt portion of the funds, BBF could not be held liable for 

doing so. 

Plaintiffs also raise a variety of miscellaneous arguments 

regarding the proceedings in state and federal court and the 

actions of the IRS and BBF, including a claim that BBF wrongfully 

fired Mr. Silvey as a result of his dispute with the IRS. This 

latter claim was not raised in the district court, and we will not 

consider it on appeal. See Gillihan v. Shillinger, 872 F.2d 935, 

938 (10th Cir. 1989). Mr. Silvey must bring any claim he may have 

against BBF for wrongful termination in state court. We are not 

persuaded by plaintiffs' other arguments. 

Both the federal and nonfederal defendants have asked for 

sanctions against plaintiffs for prosecuting an allegedly 

frivolous appeal. Due to the circumstances of the proceedings 

below and some of the issues raised by plaintiffs on appeal, we 

conclude that plaintiffs' appeal was not frivolous and does not 

warrant the imposition of sanctions. 

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Appellate Case: 89-3042 Document: 010110041897 Date Filed: 08/30/1990 Page: 11 
Based on the foregoing, appeal Nos. 89-3026, 89-3042, and 

89-3061 are DISMISSED for lack of jurisdiction. We retain 

jurisdiction over appeal No. 89-3193 and AFFIRM the judgment of 

the United States District Court for the District of Kansas. 

Appellees' respective motions for sanctions are DENIED. 

appellants' outstanding motions are DENIED as moot. 

The mandates shall issue forthwith. 

ENTERED FOR THE COURT 

PER CURIAM 

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All of 

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