Court Opinion

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Date Created: 2015-10-13 23:02:32.20601+00
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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Precedential or Non-Precedential: Non-Precedential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                                                                 NOT PRECEDENTIAL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