Court Opinion

ID: 4031059
Source: CourtListenerOpinion
Date Created: 2016-09-02 20:01:13.492014+00
Date Added: 2024-06-11T14:29:30.379730
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS
                                                                           FILED
                            FOR THE NINTH CIRCUIT
                                                                            SEP 02 2016
                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
In re: WENDY K. PITTS,                           No.   14-56502

              Debtor,                            D.C. No. 5:13-cv-02099-ODW

WENDY K. PITTS, faw DIR Water                    MEMORANDUM*
Proofing and Wadsworth General
Contracting faw Wadsworth Glazing Inc.,

              Appellant,

 v.

UNITED STATES OF AMERICA,

              Appellee.

                    Appeal from the United States District Court
                       for the Central District of California
                    Otis D. Wright II, District Judge, Presiding

                           Submitted August 31, 2016**
                              Pasadena, California

Before: SILVERMAN, FISHER, and WATFORD, Circuit Judges.

         *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
         **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      Wendy Pitts appeals the district court’s judgment, affirming the bankruptcy

court, in Pitts’s adversary proceeding seeking to discharge federal tax liens. We

review the district court’s decision on appeal from a bankruptcy court de novo, and

we affirm. Barrientos v. Wells Fargo Bank, N.A., 633 F.3d 1186, 1188 (9th Cir.

2011).

      Pitts was a general partner in D I R Waterproofing, and the United States

liened Pitts’s personal property after DIR failed to pay trust fund and employment

taxes assessed against DIR. Pitts concedes that, as a general partner, she is liable

for the partnership’s debts under state law. She argues, however, that the United

States may not use administrative enforcement procedures against her – instead,

because her liability arises from state partnership law, the United States is confined

to remedies under state law. We disagree.

      First, pursuant to the plain language of 26 U.S.C. § 6321, Pitts is a “person

liable to pay any tax,” and a lien in favor of the government arises by operation of

federal law. See In re Crockett, 150 F .Supp. 352, 354 (N.D. Cal. 1957)

(California partner was liable for debts of partnership under state law; accordingly,

partner was liable for entire amount of partnership’s employment taxes, and was

“person liable to pay” under § 6321’s identically worded predecessor); see also

Bresson v. C.I.R., 213 F.3d 1173, 1178 (9th Cir. 2000) (where the IRS relied on

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state law to establish an individual’s liability, “the government’s underlying right

to collect money in this case clearly derives from the operation of federal law (i.e.,

the Internal Revenue Code)”).

      Second, the United States may utilize administrative enforcement procedures

to collect the debt from Pitts, because she is secondarily liable for DIR’s assessed

debt. See United States v. Galletti, 541 U.S. 114, 122 (2004) (“After the amount of

liability has been established and recorded, the IRS can employ administrative

enforcement methods to collect the tax”). The United States is not obligated to

make a second assessment against Pitts individually, because the consequences of

its assessment attach to the assessed debt “without reference to the special

circumstances of the secondarily liable parties.” Id. at 123.

      Pitts next argues that the United States is bound by the state’s statute of

limitation in its efforts to collect DIR’s debt from her. Again, we disagree.

      The United States is not subject to a state statute of limitations when it

attempts to enforce a claim created by federal statute and proceeds in its sovereign

capacity to enforce that claim. Bresson, 213 F.3d at 1177. Here, the United States’

right to collect money in this case derives from the operation of federal law –

namely, the Internal Revenue Code. Id. at 1178. Also, the United States

unquestionably acts in its sovereign capacity when it attempts to collect taxes. Id.

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      Finally, Pitts argues that the taxes are dischargeable in her chapter 7

bankruptcy proceeding, and that the United States’s continuing lien violates the

discharge injunction contained in 11 U.S.C. § 524(a)(2), again because she

contends that the underlying obligations are not federal taxes, but instead are state

law partnership debts. For the reasons stated above, we again disagree.

      We do not reach Pitts’s argument that she is entitled to an Article III

adjudication of her status as a partner, because she did not raise this argument

below. We note that, before the bankruptcy court, she conceded her status as a

general partner in the parties’ joint statement of stipulated facts, and in her second

amended complaint.

      AFFIRMED.

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