Opinion
Civil Action No. SA-03-CA-0511-FB.
September 28, 2004
ORDER CONCERNING PENDING MOTIONS
Before the Court are the following motions: (1) United States' Motion for Partial Summary Judgment Against Defendant Milburn R. Vernor and Gloria Von Vernor (docket #7); Defendants, Milburn R. Vernor and Gloria Von Vernor's Response to the United States' Motion for Partial Summary Judgment (docket #10), and United States' Reply Concerning its Motion for Partial Summary Judgment (docket #11); (2) Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Motion for Leave to File Supplemental Response to the United States' Motion for Partial Summary Judgment (docket #18), and United States' Response Concerning Defendants Motion for Partial Summary Judgment and Response to Defendants' Motion for Leave to Supplement (docket #19); (3) Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Motion for Partial Summary Judgment (docket #26); United States' Response to Defendant's Motion for Partial Summary Judgment Regarding the Limitations Period for the Fraudulent Conveyance Action (docket #27), and Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Reply to the United States' Response to Defendants' Motion for Partial Summary Judgment (docket #28); (4) Motion to Strike Defendants' Jury Demand as to Certain Claims (docket #29), and Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Response to Plaintiff United States' Motion to Strike Defendants' Jury Demand (docket #30), and (5) Motion of United States of America for Leave to File Two Motions for Partial Summary Judgment Beyond the Motion Filing Deadline (docket #32), and Defendants' Opposition to United States of America's Motion for Leave to File Two Motions for Partial Summary Judgment Beyond the Motion Filing Deadline (docket #33). The plaintiff, United States of America, states the purpose of the motion for partial summary judgment (docket #7) is: (1) to reduce three years of adjudicated Tax Court liabilities to judgment; (2) to establish that the assessment statute of limitations was properly met for each of the three tax claims raised by this motion; (3) for a determination that laches cannot apply to the United States; (4) to reject defendants' tax protest type claims that this matter was not properly authorized; (5) to strike the alleged Federal Tort Claims Act claims for lack of jurisdiction, and (6) to determine that defendants' claims for 26 U.S.C. § 7433 relief are not properly before this Court because sovereign immunity by the United States has not been waived. In their response, defendant Milburn R. Vernor and Gloria Von Vernor (hereinafter "Vernors") contend the United States has not established as a matter of law that the assessment statute of limitations has been met; the Federal Tort Claims Act does apply to an enforcement officer who has committed an abuse of process, and jurisdiction exists herein for relief pursuant to 26 U.S.C. § 7433. In reply, plaintiff asserts each of the Vernors' assertions above is wrong.
Following the submission of the above motion, defendant Vernors filed their motion for leave to file a supplemental response to the United States' motion for partial summary judgment. The Vernors assert that from the inception of this lawsuit, they have sought all documentary evidence from the United States to show the taxes in question were properly assessed. Based upon the documents received, the Vernors contend there has never been a signed assessment in this case. Therefore, they seek to file a supplemental response to plaintiff's motion in the form of their own motion for partial summary judgment based on the fact that no signed assessment of the taxes in question was ever made.
In response to this last assertion, the United States filed its limited response to "fully repudiate the single assertion made by the Vernors in their Motion for Partial Summary Judgment" and to "negate any reason to permit or require a supplemental summary judgment response." The United States explains that the "signed" assessment records have now been produced to the defendants because the Vernors' summary judgment motion have made them an issue. The United States maintains that even without the production of the signed record of assessment, the Vernors are not entitled to relief where reliance is placed on Forms 4340, Certificates of Assessments and Payments, as has been the case herein, and the defendants have not shown these forms to be in error. Therefore, the United States argues defendants' motion for partial summary judgment as well as their request for leave to supplement their summary judgment response should be denied because defendants have been supplied with the signed record of assessment asserted by them to be nonexistent or missing. The Court agrees.
Accordingly, IT IS HEREBY ORDERED that Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Motion for Leave to File Supplemental Response to the United States Response to the United States' Motion for Partial Summary Judgment (docket #18) is DENIED.
Returning to the motion for partial summary judgment filed by the United States, the Court notes that defendants have responded to only three of the six issues raised by the plaintiff. Defendants claim (1) the United States has not established as a matter of law that the assessment statute of limitations has been met; (2) the Federal Tort Claims Act does apply to an enforcement officer who has committed an abuse of process, and (3) jurisdiction for relief exists under 26 U.S.C. § 7433. In reply, plaintiff asserts that this Court has no jurisdiction as to defendants' Federal Tort Claims Act cause of action and their claim pursuant to 26 U.S.C. § 7433 because they have failed to exhaust their administrative remedies. Defendants assert in their counterclaim that plaintiff brought this lawsuit despite the fact that lawful, timely tax assessments were not made and the applicable statute of limitations had run. In addition, an internal revenue services officer allegedly seized a 1999 Ford truck from Milburn Vernor as a result of alleged unpaid tax liabilities even though the vehicle was not owned by Mr. Vernor. Defendants allege these actions constitute abuse of process by the plaintiff and bring this claim "under the Federal Tort Claims Act." Defendants' counterclaim pursuant to 26 U.S.C. § 7433 also alleges that lawful and timely tax assessments were not made, all applicable statutes of limitations had run and in spite of this knowledge, plaintiff recklessly or intentionally, or by reason of negligence, disregarded such knowledge and persisted with its unauthorized collections. In response to plaintiff's partial motion for summary judgment, defendants state that they have been working administratively with the Internal Revenue Service for almost ten years in an effort to sort out their tax difficulties and at no time did the IRS or other agency indicate there were any further administrative remedies remaining to be satisfied. In addition, defendants contend any effort to exhaust their administrative remedies would have been futile given the clear bias against the Vernor defendants by the Internal Revenue Service. Without any evidence in support, defendants contend they have "satisfied their obligation to exhaust administrative remedies, or such obligation is excused on the grounds of futility." The Court disagrees.
The Court acknowledges that the failure to file a response by itself "is an insufficient basis for a grant of summary judgment."Resolution Trust Corp. v. Starkey, 41 F.3d 1018, 1022-23 (5th Cir. 1995). The United States "still must establish the absence of a genuine issue of material fact before it can prevail on a summary judgment motion." Id. at 1023.
Title 28 section 2675(a) of the United States Code provides in part:
An action shall not be instituted upon a claim against the United States for money damages for injury or loss of property or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, unless the claimant shall have first presented the claim to the appropriate Federal agency and his claim shall have been finally denied by the agency in writing and sent by certified mail or registered mail.
Likewise, 26 U.S.C. § 7433(d)(1) also requires administrative remedies be exhausted:
A judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.
This Court's subject matter jurisdiction is "conditioned upon compliance with 28 U.S.C. § 2675(a)," and with § 7433(d)(1) — requirements found to be jurisdictional and not to be waived. Price v. United States, 69 F.3d 46, 54 (5th Cir. 1995);see Brooks v. Snow, 313 F. Supp. 2d 654, 661-62 (S.D. Tex. 2004) ("Recovery of damages under § 7433, however, requires Plaintiffs first to exhaust their administrative remedies"; court lacked subject matter jurisdiction because plaintiffs had not pleaded or "shown any administrative exhaustion of their claim for damages under § 7433"). Defendants did not allege administrative exhaustion in their counterclaim or provide this Court with any evidence that they complied with these jurisdictional requirements with respect to the claims they now assert. Therefore, this Court lacks subject matter jurisdiction over these claims. In addition, defendants' claim of futility also lacks merit.Brooks, 313 F. Supp. 2d at 661 (plaintiffs argued "submitting a claim for abatement or refund of interest would be useless given the `preemptive' denial of claims in the `Selesky letters'"; court nevertheless required plaintiffs to exhaust their administrative remedies); Franklin Savs. Corp. v. United States, 970 F. Supp. 855, 861 (D. Kan. 1997) (court required exhaustion of administrative remedies; "[t]he fact that pursuing an administrative remedy would be a futile endeavor, however, is irrelevant"), aff'd, 180 F.3d 1124 (10th Cir.),cert. denied, 528 U.S. 964 (1999). Accordingly, plaintiff's motion for summary judgment as to these claims shall be granted.
Much ink also has been spilled in this case on the tax assessments made by the plaintiff. Plaintiff alleges the assessments for the tax years 1990, 1991, and 1992, were timely made. Despite receipt of Forms 4340, Certificates of Assessments and Payments for each tax period from the plaintiff, defendants claimed in their answer that the United States did not make timely assessments for these tax periods. In response to plaintiff's motion for summary judgment on this issue, defendants contend a "signed assessment must be produced to constitute sufficient evidence the assessment occurred." Defendants' Response, docket #10 at 2. Defendants quote from Braufman v. United States, 384 F.2d 863, 867 (5th Cir. 1967), as follows:
What is important in any case is the assessment is not automatic upon recordation; it required the action of an assessment officer. That action, as defined explicitly in the Treasury Regulations, is the signing of the certificate [of assessment].
Defendants argue, therefore, that absent the production of signed certificates of assessment, the government cannot establish as a matter of law that the Vernors are responsible for the assessment or that assessment took place within the period of limitations. Defendants claim the United States has presented no evidence of delivery of the assessments to the Vernors, by certified mailing or hand delivery, but have only offered a computerized listing of events that supposedly happened without any independent verification that the events, including assessments, actually happened. Defendants also claim that not only is the computerized listing hearsay, it also flatly contradicts what Milburn R. Vernor and Gloria Von Vernor aver in their separate affidavits:
At no time did I receive an Assessment Certificate from the Internal Revenue Service or any other governmental entity for the tax years 1990, 1991, and 1992. I have no knowledge of any such assessment having been made for those tax years.
Defendants maintain a fact issue exists as to whether any assessments were properly made within the time prescribed by statute, and therefore, the United States is not entitled to summary judgment on the Vernors' defense that the statute of limitations has run with respect to the assessment of taxes for the period in issue.
The motion for partial summary judgment sets forth the factual background of the case to which defendants have not objected. According to the motion and supporting documentation, Milburn and Gloria Vernor filed their 1990 joint income tax return on October 16, 1991. Milburn Vernor filed his 1991 income tax return on October 16, 1992, and his 1992 income tax return on April 15, 1993. Gloria Vernor filed her 1991 income tax return on October 16, 1992, and her 1992 income tax return on April 15, 1993. Milburn and Gloria Vernor filed a petition with the United States Tax Court to challenge audit deficiencies asserted by the Internal Revenue Service against them for the tax years 1990, 1991, and 1992, on September 12, 1994. The United States Tax Court entered a certified Order of Dismissal and Decision on November 15, 1995. The Vernors did not appeal the decision by the Tax Court. Therefore, the decision of the tax court became final on February 13, 1996. United States v. Gates, 80 F. Supp. 2d 682, 683 (S.D. Tex. 1999) ("decision of the tax court becomes final at the end of a ninety-days appeals period"). Because no appeal was filed, the United States was required to make "its assessment within sixty days after the appeals period ended" which in the instant case occurred on or about April 13, 1996 (April 13 fell on a Saturday so therefore, the United States presumably had until Monday, April 15, 1996 to file its assessment). Id. ([i]f no appeal is filed, the government must make its assessment within sixty days after the appeals period ends"). The record reflects the assessment was made on March 8, 1996, well within the prescribed time period.
Having made the assessment, collection proceedings must be initiated within ten years. Id. As explained by the court in Gates:
After an assessment is made, the government must demand payment from the taxpayer. If a taxpayer refuses to pay the assessed deficiency after a government demand, a lien automatically attaches to all property or rights to property belonging to the taxpayer. The government has ten years from the assessment date to collect the unpaid tax, either by levy or through a court proceeding. If the government fails to initiate collection proceedings within this ten year period, the tax liability becomes uncollectible as a matter of law. (Citations omitted).Id. Here, the United States filed this suit on June 18, 2003, which is well within the ten year period which will expire on or about March 8, 2006.
As in Gates, plaintiff here provided this Court with a Certificate of Assessments and Payments or Form 4340 for each of the tax years in issue as proof of the dates of assessment, i.e, March 8, 1996. Id. This form "is adequate to prove a valid assessment if it lists the `23C date,' indicating the date on which the actual assessment was made. The `23C' indicates the date on which an IRS officer signs a summary record of assessment, known as a Form 23C" Id. at 683-84 (citations omitted). The record submitted by the United States in this case includes the Form 4340 for each of the tax years in issue and each reflects an assessment date of March 8, 1996. Government Exhibits 1 through 5 contained in Appendix to United States Motion for Partial Summary Judgment. These forms "constitute valid evidence of a taxpayer's assessed liabilities and the IRS's notice thereof." Perez v. United States, 312 F.3d 191, 195 (5th Cir. 2002). To rebut the Form 4340 presumption of validity, "the taxpayer must produce evidence to the contrary." Stallard v. United States, 12 F.3d 489, 493 (5th Cir. 1994). Although no contrary evidence has been presented, the Vernors contend the United States failed to provide them with "signed certificates of assessment," and evidence of their delivery. They also aver they never received any assessments from the Internal Revenue Service for the years 1990, 1991, and 1992.
In March v. Internal Revenue Serv., 335 F.3d 1186 (10th Cir. 2003), Brian and Victoria March (appellants) made an argument similar to the one asserted by the Vernors herein. They argued that the IRS was required to provide them with an assessment of taxes due, the assessment was required to be made on a Form 23C, and the Form 23C had to be "signed by an authorized officer of the IRS." Id. at 1187. As the IRS did in the instant case, the IRS provided Mr. and Mrs. March with a Form 4340. Id. In finding the appellants' claim without merit the court explained:
Title 26 U.S.C. § 6203 simply provides that
[t]he assessment shall be made by recording the liability of the of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment.
The regulations accompanying this statute provide that "[t]he assessment shall be made by an assessment officer signing the summary record of assessment." 26 C.F.R. § 301.6203-1 (2002). The regulations further provide that the summary record of assessment shall include certain information and that upon a taxpayer's request, "he shall be furnished a copy of the pertinent parts of the assessment which set forth [certain information]." Id.
As Appellants note, the IRS has historically used Form 23C as the "Summary Record of Assessments" or "Assessment Certificate," as explained in the Internal Revenue Service Manual. As Appellants concede, however, the Service Manual is not binding on this court. Furthermore, no regulation or statute requires that the "copy of the record of the assessment" mentioned in 26 U.S.C. § 6203 be made on Form 23C.
Nevertheless, regardless of the form used, the IRS must comply with the regulations governing the assessment process. The purpose of these regulations is to ensure both the efficiency and the accuracy of the assessment process. The signature requirement in 26 C.F.R. § 301.6203-1 appears to serve multiple purposes. The requirement ensures that an assessment officer reviews the assessment before it is sent to the taxpayer, and the placing of the officer's signature establishes an effective date of the assessment that is relevant for certain timing requirements. Historically, the document reviewed and signed by the assessment officer has been Form 23C.
To ensure the taxpayer's ability to challenge alleged errors in the assessment process, the regulations allow the taxpayer to request a copy of certain parts of the assessment record. However, the courts have generally held that the IRS need not provide a taxpayer with a copy of the actual Summary Record of Assessment. Instead, the courts have held that the IRS may submit Certificates of Assessments and Payments on Form 4340. Form 4340 details the assessments made and the relevant date that a Summary Record of Assessment was executed. The courts have also held that these Certificates on Form 4340 "are presumptive proof of a valid assessment." (Citations omitted, emphasis added).
The Commissioner "has for a number of years been engaged in making a transition in [his] assessment procedure from the general use of a manually prepared Form 23C to the general use of RACS 006." Like Form 23C, RACS Report 006 is a summary record of assessment. However, RACS Report 006 is generated on the computer and then signed by an assessment officer on the date of assessment in accordance with 26 C.F.R. § 301.6203-1. Form 23C is now only used when the computer is unavailable. (Citations omitted).
Therefore, the IRS concedes in its brief, Form 23C is not generally used. Nevertheless, since RACS Report 006 contains the same information contained on Form 23C and is certified and signed by an assessment officer, RACS Report 006 satisfies the signature and certification requirements of 26 C.F.R. § 301.6203-1. Furthermore, as discussed above, production of a Form 4340 creates a presumption that a Summary Record of Assessment, whether on Form 23C or RACS Report 006, was validly executed and certified. As the magistrate judge found, the Certificates of Assessment provided to Appellants on Form 4340 were certified and valid. Therefore, Appellants' first claim has no merit. (Emphasis added).Id. at 1187-89. Here, not only did the United States provide certified and valid Forms 4340 but also provided the Vernors with the RACS Report-006 (Government Exhibit 1 attached to United States' Response Concerning Defendants Motion for Partial Summary Judgment and Response to Defendants Motion for Leave to Supplement (docket #19)), showing the signature of the assessment officer and the March 8, 1996 date of assessment. The Court concludes that contrary to the Vernors' unsupported assertion, the United States has established as a matter of law that a valid assessment was made within the period of limitations.
In addition, the Court finds the Vernors' claim of nondelivery or notice of the assessments also to be without merit. Although the Vernors each assert they did not receive an "Assessment Certificate from the Internal Revenue," the record reflects they received Form 3552 (Part 3) entitled "Notice of Tax Due on Federal Tax Return" as they presented copies of these forms for each of the years in issue to the United States during discovery conducted in this case. See Government Exhibit 6, United States' Exhibits to Its Response to Defendant's Motion for Partial Summary Judgment Regarding the Limitations Period for the Fraudulent Conveyance Action. Part 3 of Form 3552 is always sent to the taxpayer and therefore is evidence of receipt by the Vernors. As the affidavit of Patricia Voigt explains:
The Form 3552 is referred to as the Prompt Assessment Billing Assembly. This is a five part form used to bill the taxpayer when a manual assessment is done on their account. When billing a taxpayer for the manual assessment, parts 1 and 2 of the five part form are retained by the Internal Revenue Service to be used internally for processing purposes. Parts 3 and 4 of the Form 3552 are sent directly to the taxpayer. Part 5 of the five part form is sent back to the agent or office that requested the assessment action.
Part 3 is the portion of Form 3552 that is always sent to the taxpayer with payment instructions, as opposed to Part 1 that is retained by the Internal Revenue Service for its administrative files. This form, Part 1, contains no taxpayer instructions regarding payment since it is an internal record. See Attachment 1 hereto, blank Part 1 Form 3552. The Internal Revenue Service does not retain part 3 of the Form 3552 billing assembly since this form is sent to the taxpayer on the assessment date. Attachment 2 hereto is a blank Form 3552, Part 3. Notice of Tax Due on Federal Return. Note the difference in the two forms: part 1 of Form 3552 shows accounting entries, whereas part 3 of Form 3552, instructs the taxpayer that "this is a notice of tax due on your return" and gives the taxpayer various instructions on how and where to pay. No such payment information is contained on part 1 of the Forms 3552 [sic] retained by the Internal Revenue Service.Government Exhibit 7, United States' Exhibits to Its Response to Defendant's Motion for Partial Summary Judgment Regarding the Limitations Period for the Fraudulent Conveyance Action. Moreover, the affidavits merely assert the Vernors did not receive an Assessment Certificate. The Vernors cite this Court to no authority requiring the United States to prove receipt of an "Assessment Certificate." Case law reveals the United States must provide notice, and the Vernors' affidavits do raise a fact issue as to notice. Hansen v. United States, 7 F.3d 137 (9th Cir. 1993). As the court in Hansen explained:
The Hansens contend that a genuine issue of material fact exists as to whether the Internal Revenue Service ("IRS") sent the Hansens a notice of assessment and demand for payment as required under 26 U.S.C. § 6303(a). This contention lacks merit.
The Hansens argue that the evidence submitted by the IRS to support its motion for summary judgment fails to show that notice and demand was sent to the Hansens. The IRS relied on a Form 4340 Certificate of Assessments and Payments ("Form 4340") indicating that notice and demand was sent on May 23, 1988. The Hansens argue that Form 4340 is a computer-generated form prepared exclusively for litigation and that it therefore cannot be relied on as evidence.
In Hughes, we held that Form 4340 is admissible as a public record even though generated by a computer. 953 F.2d at 539-40. We stated the Form 4340 is probative evidence in and of itself and, "in the absence of contrary evidence, [is] sufficient to establish that notices and assessments were properly made." Id. at 540. Thus, the IRS properly submitted and relied on Form 4340 to show that notice and demand was sent to the Hansens.
The Hansens argue that a genuine issue of material fact nevertheless exists on this question because they submitted their own declaration denying that they ever received a notice of assessment and demand for payment. They argue that their declaration is evidence sufficient to make summary judgment inappropriate.
The Form 4340 submitted by the IRS shows that notice and demand was sent to the Hansens' correct address on May 23, 1988. Under Rule 56(e), the Hansens were required to present "specific facts" showing that the IRS did not send them notice and demand. See Hughes, 953 F2d at 541-42. The Hansens submitted an affidavit stating only, in pertinent part, that "on or about the assessment date on our Certificate of Assessments and Payments we never received in the mail a § 6803 Notice and Demand or any other document from the IRS." This statement does not show the notice was not sent. Thus, it fails to raise a genuine issue of material fact on this issue.Id. at 138; see Perez v. United States, 312 F.3d 191, 195-95 (5th Cir. 2002) (Form 4340 considered "solid evidence" of proper assessment and notice of federal tax liabilities; taxpayer offered "only unsubstantiated, self-serving allegations that he did not receive notice of his assessed federal tax liabilities" and court found argument that Form 4340 not valid evidence of notice "specious"). Accordingly, the plaintiff's motion for partial summary judgment on the issue of assessment and notice will likewise be granted.
The Court has also considered the plaintiff's arguments concerning the application of res judicata to the tax claims for the years of 1990, 1991, and 1992, whether this litigation was properly authorized by the United States, and laches bars recovery by the United States. Upon review of the record and the arguments and authorities provided by the United States in its motion, the Court finds plaintiff is entitled to summary judgment on these issues as well.
Accordingly, IT IS HEREBY ORDERED that the United States' Motion for Partial Summary Judgment Against Defendants Milburn R. Vernor and Gloria Von Vernor (docket #7) is GRANTED. Therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the United States take judgment against Milburn R. Vernor and Gloria V. Vernor for unpaid federal income taxes for the years 1990, 1991 and 1992 as previously determined by the United States Tax Court and as assessed by the Internal Revenue Service on March 8, 1996, plus interest accruing after the dates of assessment pursuant to 26 U.S.C. §§ 6601, 6621, and 6622, and 28 U.S.C. § 1961(c) until paid. Upon conclusion of this case, counsel for the United States shall submit to this Court the unpaid balances for each defendant and tax period for inclusion into a Final Judgment that resolves all case issues.
IT IS FURTHER ORDERED ADJUDGED AND DECREED that the United States has established that the assessment statute of limitations and the collection statute of limitations regarding the 1990, 1991, and 1992 tax periods were timely met by the Internal Revenue Service and that the collection statute remains open for those years. The United States has further established that this litigation was properly authorized as stated in the United States' complaint, that the defense of laches raised by the defendants is without merit and is DISMISSED, that this Court has no jurisdiction to consider the Federal Tort Claims Act allegations nor the unauthorized collections allegations pursuant to 26 U.S.C. § 7433 raised by the defendants in their answer/counterclaim and these claims are also DISMISSED FOR LACK OF JURISDICTION.
The Court has also considered Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Motion for Partial Summary Judgment (docket #26). In this motion, they seek a declaration that the alleged fraudulent transfer of certain Zavala County, Texas realty claimed by the United States is time barred pursuant to 26 U.S.C. § 6502(a)(1). The defendants assert that the alleged fraudulent transfer from Milburn Vernor to the Oasis Investment Corporation was executed on July 3, 1992. Therefore the applicable ten-year period found in 26 U.S.C. § 6502(a)(1) bars all claims after July 3, 2002. Because the United States did not file suit until June 18, 2003, the claim for the alleged fraudulent transfer of the Zavala County, Texas realty on July 3, 1992, is barred as a matter of law.
In response, the United States points out that the ten year period to bring any type of collection action, including actions to set aside fraudulent transfers, does not begin to run on the property transfer date or fraud date, but the statute runs from the date the federal tax assessments were made and which are sought to be reduced to judgment. Here, the United States Tax Court determined the taxes due for the years 1990, 1991, and 1992, and the Internal Revenue Service assessed these taxes on March 8, 1996. Therefore, the collection action filed in June of 2003 which includes the action to set aside the alleged fraudulent conveyance in Zavala County is timely. In reply, defendants return to their previous argument that the United States never properly assessed the taxes because there was no properly signed assessment certificate or summary record. Defendants acknowledge that a timely assessment must have been made on or before April 15, 1996. Because they claim no assessment was filed on or before that date, the United States may not now timely reassess the taxes. Moreover, defendants contend that without a proper assessment date, the only date that could be used in the date of the alleged transfer. Ten years from July 3, 1992, the date of the transfer, expired on July 3, 2002.
Because the Court has previously addressed the assessment issue and has found the taxes for the years 1990, 1991, and 1992, were properly assessed and because 26 U.S.C. § 6502(a)(1) provides that a proper assessment of tax may be "collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun — within 10 years after the assessment date," IT IS HEREBY ORDERED that Defendants, Milburn R. Vernor, Gloria Von Vernor, Brenda McCurdy, Trustee for the Living Water Trust, Anthony Travis Vernor and Velvet Vernor's Motion for Partial Summary Judgment (docket #26) is DENIED.
The Court has also reviewed the Motion to Strike Defendants' Jury Demand as to Certain Claims and the response. Because the Court has previously dismissed the defendants' Federal Tort Claims Act claim as well as the claim pursuant to 26 U.S.C. § 7433, the jury demand as to these issues is moot. Also, the United States does not dispute that a jury demand may be made regarding its claim to reduce the tax assessments to judgment and obtain a personal money judgment against the Vernors. Defendants maintain in their response that they are entitled to a jury trial on the issues involving a determination as to their monetary liability. Because plaintiff is not asking that the jury demand be struck as to that issue, the Court finds plaintiff's motion has merit.
Accordingly, IT IS HEREBY THAT the Motion to Strike Defendants' Jury Demand as to Certain Claims (docket#29) is GRANTED. IT IS FURTHER ORDERED that the jury demand as to the issue of the United States reducing tax assessments to judgment and obtaining a personal money judgment against Milburn Vernor and Gloria Vernor is proper and remains but all other demands for a jury are struck as not authorized and/or prohibited by law.
The last motion to be considered is the Motion of the United States of America for Leave to File Two Motions for Partial Summary Judgment Beyond the Motion Filing Date and Defendants' Opposition thereto. Although the Court's Scheduling Order set the dispositive motions deadline for May 3, 2004, the United States seeks leave to file two motions for partial summary judgment as to the fraudulent transfer of property — one as to the Zavala County property and the other as to the Uvalde County property. The United States contends that a favorable ruling on these motions would substantially limit the remaining issues in dispute. Defendants oppose the request because they believe the alleged fraudulent conveyances are fact intensive thereby making any motions non-meritorious and a waste of judicial resources as well as a waste of their own resources.
In reviewing the motions, the Court noted that in the Certificate of Conference, counsel for the United States "presumed" the defendants would not oppose the motion as counsel for the United States previously did not oppose extensions involving summary judgment pleadings and extensions regarding discovery. This along with the fact that no trial date has been set, and the parties have been awaiting a ruling on the foregoing pending motions supports a finding by the Court that the motion should be granted. Accordingly, IT IS HEREBY ORDERED that the Motion of United States of America for Leave to File Two Motions for Partial Summary Judgment Beyond the Filing Deadline (docket #32) is GRANTED and the United States shall have until October 16, 2004, to file two Motions for Partial Summary Judgment as to the alleged fraudulent conveyances of property located in Zavala and Uvalde counties.
It is so ORDERED.