Court Opinion

ID: 770169
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:31:14+00
Date Added: 2024-06-11T17:55:48.358580
License: Public Domain

224 F.3d 716 (7th Cir. 2000)
In the Matter of Herbert P. Carlson  and Margaret P. Carlson, Debtors-Appellants.
No. 98-2454
In the  United States Court of Appeals  For the Seventh Circuit
Submitted April 17, 2000
Decided August 15, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 96 C 6566--John A. Nordberg, Judge.
Before Fairchild, Posner, and Diane P. Wood, Circuit  Judges.
Diane P. Wood, Circuit Judge.

1
Herbert Carlson is  a lawyer. For a period of time, he neglected to  pay any of the approximately $150,000 in income  tax that he owed for the money he earned in 1990,  1991, and 1992. Eventually, Carlson paid up, but  he contested his obligation to pay the  accompanying interest and penalties on the  overdue income taxes, as well as some  unemployment and Social Security taxes that were  assessed on the payroll of Carlson's law  practice. In the meantime, in 1994 Carlson sought  Chapter 11 bankruptcy protection. Before the  bankruptcy court, the IRS filed a proof of claim,  which Carlson unsuccessfully opposed both there  and on appeal. See Matter of Carlson, 126 F.3d  915 (7th Cir. 1997).

2
The bankruptcy court later (on August 20, 1996)  dismissed Carlson's case for failure to submit a  confirmable plan. Carlson appealed to the  district court, where his case is currently  pending. In connection with that appeal, Carlson  asked the bankruptcy court for a stay of  collection proceedings pending the district  court's resolution of the case. The bankruptcy  court denied his request, as did the district  court. The case stalled at that point for quite  some time, while Carlson moved for  reconsideration, settlement discussions took  place, and the IRS received unfulfilled promises  for payment. During much of that time, a  temporary stay was in effect. Eventually,  however, on June 3, 1998, the district court  denied Carlson's motion to reconsider its earlier  (1996) order denying the stay. The judge offered  Carlson the option of a stay if he posted a  $700,000 bond (which the judge indicated was his  estimate of the amount likely to be due by the  time all was said and done), but Carlson either  cannot or will not post such a bond. He and his  wife have appealed to this court asking us to  reverse the district court's decision.

3
Before addressing his arguments, we must resolve  a matter of appellate jurisdiction. Since no  final decision has been rendered by the district  court, Carlson is invoking our jurisdiction under  the collateral order doctrine of Cohen v.  Beneficial Loan Corp., 337 U.S. 541 (1946). A  collateral order is sufficiently final in itself  to support jurisdiction under 28 U.S.C. sec. 1291  if three criteria are met: (1) the order must  conclusively determine the disputed question; (2)  it must resolve an important issue completely  separate from the merits of the action; and (3)  it must be effectively unreviewable on appeal  from a final judgment. Wingerter v. Chester  Quarry Co., 185 F.3d 657, 662-63 (7th Cir. 1999).  At least in the bankruptcy context, and perhaps  generally, the most important of these criteria  is the third. See In re Firstmark Corp., 46 F.3d  653, 659-60 (7th Cir. 1995); In re Klein, 940  F.2d 1075, 1078 (7th Cir. 1991); Matter of UNR  Industries, Inc., 725 F.2d 1111, 1117 (7th Cir.  1984). See also Matter of Forty-Eight  Insulations, Inc., 115 F.3d 1294, 1300 (7th Cir.  1997) (allowing appeal of a denied stay under 28  U.S.C. sec. 1292 because remaining creditors'  interests could not be properly protected if  ordered distribution occurred). This makes sense,  since the point of the Cohen exception to the  final judgment requirement is that where the harm  of the order cannot be remedied on appeal, the  order itself is effectively final and the  hypothetical chance to complain after final  judgment in the principal action does the losing  party little good. Palmer v. City of Chicago, 806  F.2d 1316, 1318-19 (7th Cir. 1986).

4
Carlson maintains that because stay was denied,  the IRS is free to seize and liquidate his home  to satisfy its tax claim. The IRS agrees that  sale of the property may be required. In general,  if the IRS were to seize assets for payment of  taxes, penalties, or interest, and a court later  ruled that the taxpayer was not liable for some  or all of the payment, the damage could be undone  by a simple order requiring repayment with  appropriate interest. Carlson urges us here to  recognize an exception to that principle, because  of the heightened interest he has in his home. He  notes that homes are treated specially in a  variety of different contexts. See, e.g., 11  U.S.C. sec. 522(d) (bankruptcy exemptions);  United States v. James Daniel Good Real Property,  510 U.S. 43, 54 (1993) (forfeitures); California  v. Ciraolo, 476 U.S. 207, 213 (1986) (searches).  He concludes that, to the extent this case is  about the IRS's power to seize his home for  satisfaction of his tax liabilities, it's now or  never for him.

5
The IRS counters by saying that while Cohen  applies to the denial of a security requirement  (thus allowing it to appeal now if the district  court had granted a stay without imposing a bond  requirement), the rule does not reach a decision  to require security, which was the effect of the  district court's order in this case. A denial of  security is ordinarily immediately appealable  because the prevailing plaintiff who is denied  security may find that the defendant's assets  that were once available to satisfy the judgment  have vanished during appellate litigation. Matter  of UNR Industries, Inc., 725 F.2d at 1117.  Requiring security usually does not raise that  problem because if the losing side fails to post  security, the prevailing party can collect  immediately, recognizing that it will have to  return the money should the judgment be reversed  on appeal. See Cohen, 339 U.S. at 688 ("The  situation is quite different where an attachment  is upheld pending determination of the principal  claim. . . . In such a situation the rights of  all the parties can be adequately protected while  the litigation on the main claim proceeds.").  Here, of course, the IRS could return the  proceeds of the sale of Carlson's home (less the  outstanding mortgage balance). Still, money is  not the same as the house, and Carlson is  undoubtedly right to note that there is no  guarantee that the government would keep the home  itself for the duration of the appeal. Our  decision thus assumes that Carlson's prediction  is correct if the IRS turns to his home for  satisfaction of its claims, he and his wife will  not live in that home again.

6
The real problem Carlson faces is that he  offers absolutely no authority for the  proposition that homes are somehow exempt from  tax liens. This is not surprising, because it is  not uncommon for the IRS to turn to precisely  that asset for payment. See, e.g., American Trust  v. Internal Revenue Service, 142 F.3d 920 (6th  Cir. 1998); Taffi v. United States, 96 F.3d 1190  (9th Cir. 1997); United States v. Denlinger, 982  F.2d 233 (7th Cir. 1992). The Carlsons are  typical in that their home represents one of  their largest assets. We are not unaware of the  disruption this imposes on individuals, but this  is a problem Carlson brought upon himself. We  therefore conclude that the substantial personal  grief that the family would experience if the IRS  follows through pending this appeal and seizes  the house is nonetheless not the kind of  irreparable injury that the Cohen doctrine  requires. That means that we have no appellate  jurisdiction and we must dismiss the appeal.

7
If we are mistaken about the absence of a  conclusive presumption that the loss of one's  home is irreparable, we would agree that Cohen  would support an appeal. But that would not get  Carlson very far, because this particular appeal  is utterly without merit. Ordinarily a party is  entitled to a stay pending appeal only by posting  an appropriate bond. See Fed. R. Civ. P. 62(d);  Fed. R. Bankr. P. 7062. The district court has  the discretion to waive this requirement, but  waiver is appropriate only if the appellant has  a clearly demonstrated ability to satisfy the  judgment in the event the appeal is unsuccessful  and there is no other concern that the appellee's  rights will be compromised by a failure  adequately to secure the judgment. See, e.g.,  Dillon v. City of Chicago, 866 F.2d 902, 904-05  (7th Cir. 1988); NIPSCO v. Carbon Coal Co., 799  F.2d 265, 281 (7th Cir. 1986). This case presents  the polar opposite of a situation in which waiver  is appropriate. There is every reason to lack  confidence that Carlson will pay up eventually;  to the contrary, just two days after a prior IRS  collection effort, Carlson signaled his intent to  evade his obligations by transferring a piece of  real estate to his son at no charge. Carlson, 126  F.3d at 919. Nor has Carlson subsequently  demonstrated anything but obstinance in this  matter since our last opinion. Indeed, although  this appeal was docketed in June 1998, Carlson's  various motions for extension delayed its  submission for nearly two years. Finally, the  $700,000 amount seems reasonable in light of the  estimated tax liability Carlson faces.  Consequently, the district court's decision to  apply the usual bond requirement was well  justified.

8
The appeal is Dismissed for lack of jurisdiction.