Court Opinion

ID: 798299
Source: CourtListenerOpinion
Date Created: 2012-04-19 16:32:31+00
Date Added: 2024-06-11T17:59:44.717243
License: Public Domain

NOT PRECEDENTIAL

           UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT

                         _____________

                          No. 11-3622
                         _____________

               UNITED STATES OF AMERICA

                                v.

              JOHN ZARRA; MARSHA ZARRA,
                          Appellants

                                v.

J.P. MORGAN CHASE & CO.; CITIZENS FINANCIAL GROUP, INC.
                     _____________

        On Appeal from the United States District Court
            for the Western District of Pennsylvania
                District Court No. 2-10-cv-00811
        District Judge: The Honorable Joy Flowers Conti

        Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                        April 17, 2012

     Before: SCIRICA, AMBRO, and SMITH, Circuit Judges

                 (Opinion filed: April 19, 2012)

                    _____________________

                           OPINION
                    _____________________
SMITH, Circuit Judge.

      Defendants John and Marsha Zarra (collectively, “the Zarras”) appeal from

an order of the District Court granting summary judgment in favor of Plaintiff

United States of America (the “Government”). We will affirm.

      In April 2000, the Zarras timely filed their taxes for the year 1999, attaching

a check made out to the Internal Revenue Service (“IRS”) in the amount of

$179,501. This was the correct amount of their liability for 1999. For some

unexplained reason, however, only $179.50 was actually transferred to the IRS

from the Zarras’ account. The Zarras noticed the error, but did not submit a check

to pay the residual amount owed. On July 3, 2000, the Secretary of the Treasury

made an assessment against the Zarras for the residual amount owed from the 1999

tax year, plus penalties and interest. Less than ten years after the assessment, on

June 14, 2010, the Government filed a civil suit against the Zarras seeking the

amount assessed in July 2000 under 26 U.S.C. § 7403(a).

      On February 25, 2011, the Government filed a motion for summary

judgment in its favor, arguing that no rational trier of fact could conclude that the

Zarras had already satisfied their tax obligation, and that the Zarras could not

properly assert any affirmative defenses. On June 30, 2011, the Zarras filed a

cross-motion for summary judgment, arguing in part that the Government’s

complaint should be dismissed because: (1) the Government provided insufficient

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evidence to establish that the assessment was made on July 3, 2000, and thus could

not establish that the complaint was filed within ten years of the assessment as

required by 26 U.S.C. § 6502(a)(1); and (2) the Zarras discharged their obligations

when they submitted the check in the correct amount and are thus no longer liable

for the residual that was not transferred. On August 26, 2011, the District Court

denied the Zarras’ cross-motion for summary judgment, and granted summary

judgment in favor of the Government.

      The Zarras timely appealed the District Court’s judgment, and renewed both

of their above-listed arguments. We review the District Court’s judgment de novo,

“and will affirm only if ‘there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.’” Mabey Bridge & Shore, Inc. v.

Schoch, 666 F.3d 862, 867 (3d Cir. 2012) (quoting Fed. R. Civ. P. 56(a)). 1

      First, the Government clearly provided evidence sufficient to establish that

the relevant tax was assessed on July 3, 2000, and thus that their complaint was

timely. The Government presented an IRS Form 4340 documenting the owed

taxes as well as the July 3, 2000, assessment date. This document is “presumptive

proof of a valid assessment.” Geiselman v. United States, 961 F.2d 1, 6 (1st Cir.

1992) (quoting United States v. Chila, 871 F.3d 1015, 1018 (11th Cir. 1989)). The

1
 The District Court had jurisdiction under 26 U.S.C. § 7402 and 28 U.S.C. §§
1331, 1340 & 1345. We have jurisdiction over this appeal under 28 U.S.C. § 1291.

                                         3
Zarras have not undermined this presumptive proof in any way—the fact that the

District Court asked for additional proof during the summary judgment hearing

does not mean that the Form 4340 was insufficient to establish the date of

assessment as a matter of law. 2 As a result, the Zarras have not raised a genuine

issue of fact as to whether the Government’s complaint was filed within ten years

of the tax assessment as required by § 6502(a)(1).

      Second, the Zarras argue that they discharged their obligation when they

submitted a check to the IRS in the correct amount. The Internal Revenue Code

provides that a taxpayer remains liable to the Government “[i]f a check . . . is not

duly paid, or is paid and is subsequently charged back to the Secretary . . . .” 26

U.S.C. § 6311(b). A check is “duly paid” if it is paid “in a proper way, or

regularly, or according to law.” Robertson v. Perkins, 129 U.S. 233, 236 (1889).

The Zarras argue that, under Pennsylvania law, their check was “duly paid” in the

2
  We reject the Zarras’ argument that the Government was required to produce a
summary record of assessment signed by an assessment officer in order to prove
the date of assessment. See Geiselman, 961 F.2d at 6 (rejecting a similar argument
as “fall[ing] beneath the weight of authority”). Even if such a summary record
were required, however, the Government satisfied the requirement by introducing
Form RACS 006—a computer-generated summary record of assessments made at
a particular branch office that is signed by an assessment officer, as required by
Treasury Regulation § 301.6203-1. The Government’s witness, Sandra Mikkelsen,
clearly linked the proffered Form RACS 006 to the Form 4340 listing the Zarras’
July 3, 2000, assessment. Nonetheless, we hold that this evidence was not
necessary to establish the date of assessment because Form 4340 is presumptive
proof of an assessment, and because the Zarras have not undermined that proof in
any way. See Geiselman, 961 F.2d at 6.
                                         4
correct amount, and that they are therefore not liable for the uncredited portion of

the check. Assuming, without deciding, that Pennsylvania law governs whether

their check was “duly paid” within the meaning of § 6311(b), we agree with the

Government that the Zarras mischaracterize Pennsylvania law.

      Under Pennsylvania law, “payment by check constitutes a conditional

payment.” Romain v. Workers’ Comp. App. Bd., 901 A.2d 477, 482 (Pa. 2006).

“The condition of the payment is not accomplished until payment of the monetary

funds is actually received. . . . [I]f the transfer of funds never occurs, then payment

is never made.” Barrett v. Workers’ Comp. App. Bd., 989 A.2d 396, 399 (Pa.

Commw. Ct. 2009) (citing Romain, 901 A.2d at 482). Here, the Zarras made a

conditional payment to the IRS in the correct amount of $179,501. Only $179.50,

however, was actually transferred to the IRS. There is no dispute as to these facts.

As a result, under Pennsylvania law, payment of the residual liability “[wa]s never

made.” Id. A tax that is never paid cannot be duly paid; the Zarras thus have not

discharged their obligation, and remain liable under § 6311(b) for the amount

assessed, as a matter of law.

      Accordingly, we will affirm the District Court’s grant of summary judgment

in favor of the Government.

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