*1 аs- ineffective AFFIRMED. Stramarko’s claim is DISMISSED. of counsel
sistance America,
UNITED STATES
Plaintiff-Appellant, HEMMEN,
Stephen Defendant- C.
Appellee.
No. 93-35643. Appeals, Court of
United States
Ninth Circuit.
Submitted, Aug. 1994*. 7, 1995. April
Decided * panel unanimously case suitable for argument, Vgeri’s finds this prior counsel bad acts testimony. argument. Fed.R.App.P. disputed See United solicited the decision without oral (9th Cir.1991) Schaff, 34(a); States v. Rule 34-4. Ninth Circuit (errors by complaining will result in invited situation). exceptional reversal in the most *3 Allen,
Gary R. Robert L. Baker and Wil- Div., Easterbrook, Dept, Tax liam S. U.S. DC, Justice, Washington, plaintiff-appel- for lant. Hemmen, se, Tacoma, WA,
Stephen pro C. defendant-appellee. for ALARCON, BEEZER and Before: KLEINFELD, Judges. Circuit BEEZER, Judge: Circuit States, acting through the In- The United (“Service”), appeals ternal Revenue Service Hemmen, Stephen entry judgment for Meals, bankruptcy trusteе for Flavor Fresh (“Flavor Fresh”), seeking in its action Inc. $13,535.91 for Hemmen’s failure and interest the allowed respect to to honor its the debtor’s expense claims of administrative (“Al-Hadid” president, Falah Tuba Al-Hadid pursuant to 26 U.S.C. “taxpayer”), 6332(c)(1). contends that The Service law in as a matter of district court erred “not concluding Al-Hadid’s claims were pos- in Hemmen’s that was pay” at obligated to or that he was session levy was served. the notice of the time jurisdiction pursuant to 28 court had district jurisdic- §§ 1345. We have 1340 and re- 1291. We pursuant to 28 U.S.C. tion verse. May
I distribution in 1987 but object. failed to 23, 1983, the Service assessed a On June $70,132.89 penalty against civil tax Al-Hadid 24, 1992, brought On June remit the income and social for failure to сourt, contending in the district action security withheld Flavor Fresh taxes Hemmen failed to honor the December 1985 quarter ending Septem- employees for the was, thus, personally liable time, 30,1982. At that Flavor Fresh was ber 6332(c)(1) of the Internal Revenue 30, 1984, May Chapter 11 debtor. On trial, ensuing Code. At the bench allowing bankruptcy court entered order argued that he was not in Al- claim in Al-Hadid’s Hadid’s at the time he received the $18,000 aiding pres- the amount of in the He also contended that the *4 debtor-in-posses- ervation of the estate as stay provision, violated the automatic 11 5, 1984, September sion. the case was On 362(a), he, trustee, § that U.S.C. was enti- liquidation, Chapter to a 7 converted and quasi-judiciаl immunity tled to and that the appointed Hemmen was trustee. The bank- by by action was barred or laches ruptcy a second order on court entered Octo- equitable principles. May 5, 1993, On the 16, 1984, allowing an additional ber adminis- orally district court dismissed the action and $12,- expense in amount trative claim the of Hemmen, judgment entered for concluding court’s order indicated that 000. The no of, that he was not in or had no payment “except upon would be made fur- to, obligation respect taxpayer’s with court.” ther order of the property rights or property to at the time of levy. expressly rejected The court Hem- 17, 1985, agents Revenue On December men’s defense of laches but otherwise did not levy upon pursu- a notice of Hemmen served consider his alternative defenses. The 6332(a), Ser- § demanding ant to 26 timely appeals. vice property rights prop- he surrender all or to erty possession necessary in his to by liability, which time included II date, statutory additions. As of that legal question We review de novo the had liqui- estate had assets but not been respect whether the Service’s with to a later, Approximately dated. 18 months on taxpayer’s expense allowed administrative Hemmen, 7, 1987, May having during the claim bankruptcy must be honored estate, liquidated interim filed his final Ass’n, trustee. Bicycle See In re American $73,946.31 report, indicating that he had (9th 1277, Cir.1990). payment of administrative available ex- The Service contends that the district pense claims. Service does not admit court’s faulty premise conclusion rests on the but that it does not contest received a notice that Al-Hadid’s allowed administrative ex- to intent to distribute funds Al-Hadid pense claim “property rights was not $13,535.91 and that amount it failed to property subject levy” meaning within the objection to this file distribution. 6331(a) 6332(a). §§of Arguing and that an thereafter, bankruptcy Soon court or- allowed prop- claim is dered to disburse the funds. On Hemmen erly “property” characterized as or as a $13,535.91 3, 1987, paid June he satisfac- “right property” law, Washington tion of Al-Hadid’s claims. court dis- Hemmen, the Service contends that as bank- charged Hemmen from his duties and closed trustee, ruptcy personally liable under 25, August
the estate on
6332(c)(1)
§
for his failure to honor the De-
16, 1987,
September
agents
On
Revenue
17,
levy.
cember
1985 notice of
served a Form 668-C Final
Demand
.
referencing
Hemmen
December 1985 no-
gives
Title 26 U.S.C.
levy.
responded
tice of
one week United
unpaid
States a lien for
taxes
later, pointing out that
property
no funds were due
“all
rights
property,
and
whether
personal,
Al-Hadid at the time the notice of
belonging
real or
...
[to a delin
and
quent taxpayer].”
served
that the Service was notified of
very
The tax lien has a
accounts,
receivables,
evidences
See,
bаnk
v. Na
e.g.,
States
scope.
United
broad
713,
debt, securities,
salaries,
Commerce,
wages,
719-
472 U.S.
tional
2919, 2923-24,
commissions,
compensation....
86 L.Ed.2d
720,
or other
105 S.Ct.
(1985)
tax lien reaches
(concluding
property pos-
levy extends
[A]
taxpayer
that a
“every interest
obligations
exist at the
sessed and
which
Kimura,
have”);
F.2d
may
In re
levy. Obligations exist when
time of the
Cir.1992) (same).
law
(9th
look to state
We
liability
obligator
fixed
interest
taxpayer’s
whether a
to determine
although
right
to receive
determinable
law to
“property” and to federal
constitutes
may
until a
payment
be
thereof
deferred
consequences. Unit
resulting
determine
later date.
Bess,
51, 55, 78 S.Ct.
v.
357 U.S.
ed States
301.6331-l(a)(l) (emphasis
add-
26 C.F.R.
(1958).
liens
Tax
any property or of the The district court reached this conclusion (2) largely reasoning property United States v. taxpayer and Mitchell, (5th Cir.1965), 349 F.2d or execution. prior attachment States, in which the Fifth Circuit considered wheth- 251 F.2d Nevada v. United denied, obligated er a tax (9th Cir.1957), an insurer to turn cert. 356 U.S. (1958). over cash surrender value of its insured’s 780, 2 L.Ed.2d S.Ct. executory life insurance contract. Determin- prior' was noticed A insured’s election to take the cash surrender correct Al-Ha- value, the Fifth Circuit concluded that in his allowed did’s interest possess any insurer did it could “property” expense claims constituted under surrender the time the notice of Washington Washington “prop law. defines Noting levy, served. Id. that a unlike a See, Eastes, broadly. e.g., erty” very Lee & lien, apply after-acquired does not proper- Comm’n, Inc. v. Public Serv. Wash.2d ty, the court reasoned that “a new would (1958) (defining P.2d the term necessary seem to reach the cash surrender “embracing everything “property” as eventually value when it is demanded.” Id. value”). exchangeable Accord has Little v. passage As the underscored and the States, Cir. indicate, court’s reliance Mitchell the dis- 1983) (concluding redemption thаt a trict court’s conclusion was based on the “property” repre it when “possess determination that Hemmen did not “pecuni sents an “economic asset” that has obligated or was not to” Al- worth,” ary notwithstanding its characteriza Hadid’s at the time he received the law). “privilege” tion as a under California A levy. Thus, in addition to determin- claim who holds allowed *6 “property” whether an allowed claim is clearly bankruptcy something estate holds of law, Washington under we must consider “exchangeable” value. The fact that an al whether, law, as a matter of federal the only lowed claim can be satisfied after cer levy obligated Hemmen to surren- transpired, tain events have such as the de only der funds that became available after termination that the estate has sufficient as liquidated the estate bankruptcy was and the claim, satisfy negate sets to the does not the approved proposed court the distribution. holding “property” character of the essentially question This is timing impli- of Washington’s definition of broad this term. cating present obligation requirement the in Accord Leuschner v. First Bank & Western 6331(b). § Under the Service’s own inter- Co., 705, (9th Cir.1958) Trust 261 F.2d 708 pretation, we must determine whether the (cited in St. Louis Union Trust v. Co. United liability of bankruptcy the estate to Al-Hadid (8th States, Cir.1980)). was “fixed and determinable” at the time the was served Hemmen. B 301.6331-l(a)(l). § C.F.R. expense That an allowed administrative not, “property” claim constitutes as the brief, suggests opening disposi-
Service in its appears It that no Circuit court has decision, tive. In specifically ever, its oral the district court point, considered at which if expressly conceded that bankruptcy Al-Hadid’s claim a “obligator” estate becomes an may contingent property right be a respect whose with to a creditor’s concluded, levy. however, It the Service’s allowed administrative claim is that Al-Hadid’s interest was “not a “fixed meaning and determinable” within the 301.6331-l(a)(l). that was in the § Mr. Hem- of 26 pre C.F.R. As a of obligated liminary matter, men or that he was [Hemmen] agree we cannot with the levy. nothing at the time the Hе had district court that Mitchell establishes the of belonged at that taxpayer.” appropriate point time that departure.4 of In this re- appropriate point departure 4. An even less States, Mutual Ins. Co. New York v. United Life served holding in had the notice of been only Mitch- that the spect, we note depos- in which the estate checks were bank by passage of superceded has been ell they had been sent to and received ited Act of Pub.L. Tax Lien of the Federal [taxpayer] due course.” Id. at 198. 89-719, part at 80 Stat. No. codified 6332(b).5 Although not control- 26 U.S.C. Laughlin emphasizes that con- n us, Congress’ question ling on the before payable from cerned funds confirmed of Mitchell § 104 in the wake passage of Chapter plans took restrictively too us not to construe cautions position in that action that “the tax See scope the reach against the would not be effective estate Life, 874 F.2d Metropolitan States v. debtor, yet for which there was not the third Cir.1989). The Su- 1499-1500 plan.” Analo- a confirmed 912 F.2d rejected recently has also more preme Court gizing pre-plan Chapter 13 estate to an of the reach a restrictive construction estate, argues unliquidated Chapter 7 he that levy, in an unrelated context. See albeit position that thé no- Laughlin supports the Commerce, 472 U.S. National because it was tice of was defеctive (concluding that at 2929 105 S.Ct. argue premature. Although he does not obligates to surrender banks notice directly, implies levy, that a second point he joint in a bank account taxpayer’s funds held liqui- Chapter after the noticed estate joint prior holders notice or, even absent perhaps, bankruptcy court dated after the provisional it measure ground distribution, that is a approved was nec- promote prompt collection designed to “present obligation” essary to meet the re- taxes). 6331(b). quirement of Although decision can be construed to Laughlin persuaded also not
areWe
(8th Cir.1990),
draws
IRS,
give rise to the inference Hemmen
it,
Laughlin actually
holding
аuthority for the
cites as
which Hemmen
position
present
in the
obligated
supports
to hon-
that he
Service’s
proposition
persuaded
are
ready
action. Nor
we
levy, provides a
answer
or the tax
agreed
Eighth
would have
with Hem-
Laughlin,
In
Circuit
question before us.
question been before
Circuit,
facts,
position had this
determined men’s
Eighth
on similar
respect,
note that the court
it.
In this
we
must honor the Service’s
the trustee
to rest its decision on the
expressly
claims
declined
to a creditor’s
*7
levy was
holding that the Service’s
Chapter
for which narrower
against
two
13 estates
against
post-
a
only because claims
at the time the
valid
plans had been confirmed
13 estate are vested
Chapter
confirmation
levy
Finding no case law on
we
claim was allowed
court.
Accord
language of
directly
Antonio,
turn
26 C.F.R. United States v.
Tax
U.S.
Cas.
301.6331-l(a)(l)
(CCH)
to determine whether
P50, 482,
(D.Haw.
performed
giving
beneficial acts
rise to
sum,
Although
any,
what
if
would be
expense
his
administrative
allowed
"claims ultimately paid to Al-Hadid оn his allowed
prior
levy.
to the service
claims was uncertain at the time the notice of
provisions
Bankruptcy
The
in the
Code for
served,
uncertainty
does not
expense
of administrative
allowance
defeat the fact
obligation
the estate’s
claims and for
requirement
was “determinable.” Unlike a
priority effectively negate
proposition
the extent
obligation
of an
be “deter
that the services Al-Hadid’s rendered to the mined,” the term
requires
“determinable”
volunteer,
estate
were
beneficial acts
capable
precise
that the sum be
mea
performed
legitimate expectations
without
surement
the future.
Reiling
Accord
compеnsation.
§§
See 11 U.S.C.
States,
(CCH)
77-1 U.S. Tax Cas.
$13,535.91 payment
ultimately
he
re- P9269,
(N.D.Ind.1977) (con
WL
performance
ceived was tied to the
he under-
cluding
obligation
that an
is “determinable”
prior
took
to the service of the tax
performance
when contractual
has been com
*8
cannot, thus,
payment simply
be character-
pleted, despite continuing litigation over the
after-acquired property.
ized as
Hemmen is
due).
amount
This
determination was
fact
that,
allowed,
although
correct
Al-Hadid’s
readily made at
bankruptcy
the moment the
expense
administrative
claim could be re-
approved
court
proposed
the
distribution.
money only
duced to
it
after was determined
thаt
satisfy
sufficient assets existed to
his We conclude that an allowed administra-
claims
bankruptcy
approved
and the
court
expense
against
tive
bankruptcy
claim
a
es-
the
distribution. He is also
“property”
correct
tate is
Washington
under
law
that the
power during
trustee retained the
to a
tax
Federal
and that Hem-
the
men,
trustee,
interim to
court
move the
to disallow the
obligated
was
administrative
claims. None of
to a
liability
“fixed and determinable”
at the
trustee,
such,
represented
bankrupt-
363(b).
6. As
Hemmen
the
estate. See 11 U.S.C.
As
the
323(a).
cy
estate. See
As the es-
any
service of a notice of
him for
representative,
charged
tate's
he was
with the
obligations owing by
рroper.
the estate was
duty
money
to reduce to
the
payable to
funds
fourth
him. vice’s
on
levy was served
of
the notice
time
(5th Cir.1972);
Quakertown
In re
party)
imposes an
our conclusion
are aware
We
(3d
Center, Inc.,
Shopping
See
bankruptcy trustees.
added burden
Cir.1966) (same).
agree. The automatic
We
are also
at 199. We
F.2d
Laughlin, 912
debtor, the
stay
designed
protect
to
the
is
however,
aware,
of the additional burden
of
the
and the interests
other
the
assets of
estate
impose on
would
contrary conclusion
Laughlin, 912
in those assets.
creditors
delin-
ability
expeditiously collect
to
Service’s
Any perceived effect of a
F.2d at 198.
urges would
The rule Hemmen
quent taxes.
debtor,
estate’s assets or the
levy on the
the
opportunity
of
narrow window
create a
purely
is
chimeri-
effectively interests of
creditors
can
the Service
through which
the
cal. The
interests reached
levy.
see little benefit
We
notice
serve
non-debtor,
belonged
Al-Hadid.
closely
monitor
requiring
Service
relationship, bringing
every
created a custodial
es-
of the administration
progress
pos-
into the constructive
Al-Hadid’s
delinquent taxpayers hold
interest
against which
tate
See Glendora
session of the United States.
de-
added burden and
claims. This
allowed
Builders,
Al-Hadid’s 6332(c)(1). Hemmen’s levy in violation A moreover, levy, did failure to honor Service’s contends duty protect the assets arise out of his stay levy violated automatic noteworthy that also find estate. We *9 ,§ 11 U.S.C. 362. provision at argue the district before Hemmen did court, he court, this before above, or in his brief argument this As noted even guidance or sought or Laughlin, instruction Eighth rejected by Circuit legal question precise brought auto reasoning entities the on the He thus bankruptcy court. attention protect were left stay designed to matic to honor 198; his failure cannot characterize levy. 912 F.2d by the unaffected cf. to a court resulting obedience 436, Levin, 462 F.2d B Ltd. v. & G cirсumstances, quasi- these order. Under (doctrine bar Ser- legis does not of custodia judicial immunity trary does not shield him from nearly to its interests when after a liability. eighteen month-long period of silence follow- its notice of it received the notice of proposed disposition
C
listing Al-Hadid as
payee
Despite
of his allowed claims.
remaining equitable
Hemmen’s
de
fact,
timely object
the Service failed to
or to
fenses revolve around a common nucleus of
otherwise alert Hemmen to the fact that the
fact, involving
timely
the Service’s failure to
had not been released with
respond
proposed disposition
to his notice of
Al-Hadid’s claims.
It then served its final
аnd to initiate this action. He invokes lach
demand
proposed
several weeks after the
argues
es. He also
that the Service’s failure
distribution was effected and the estate was
object
proposed
to the notice of
distribu
closed.
position,
Unaware of the Service’s
him
believing
tion misled
into
that the Ser
Hemmen, perhaps reasonably
light
vice considered its
to be defective and
Eighth
dicta from the
Circuit’s decision in
it, consequently,
would not hold him
Laughlin
above, paid
discussed
the funds to
personally
failing
liable
to honor the
Al-Hadid in reliance on the Service’s silence.
These facts can be characterized to state a
equitable estopрel.
defense of
Although strong, the facts do not meet the
high threshold we
apply-
have established for
matter,
preliminary
As a
the district
ing equitable estoppel against
govern-
properly rejected
court
Hemmen’s invocation
public’s
ment. Even if the
interest would not
of laches. See United States v. First Nat’l
damage”
“suffer undue
singu-
because of the
Circle,
(9th
882,
652 F.2d
Cir.
here,
presented
lar facts
the Service’s failure
1981) (laches is not a defense to the enforce
object
proposed distribution,
or to
States).
ment of tax claims
the United
otherwise alert
consequences
Hemmen to the
The traditional
equi
action,
elements of
of his
course of
ques-
raises
(1)
estopрel
party
table
are that:
only
to be
tions
do;
as to what the Service failed to
(2)
facts,
estopped knows the
he or
in
she
the Service’s conduct cannot be characterized
tends that his or her conduct will be acted on as
going beyond
“affirmative conduct
mere
party
Watkins,
must so act that the
invoking estop
negligence.”
reach the amount due buyer satisfy levy by need not
paying over the amount to the district day the last
director until of the month.
Similarly, levy only reaches person upon levied at example, the time the is made. For CORNETT; Jensen; Susan Katherine made on a bank with to an Henry; Timothy Hiser, John on their delinquent taxpayer account of a is satis- own behalf and on behalf of all others fied if the bank surrenders the amount of similarly situated, Plaintiffs-Appellants, taxpayer’s balance the time the is made. The has no any effect deposit DONOVAN, subsequent taxpayer. Director, made Richard Idaho De partment Subsequent deposits may Welfare; be reached of Health and Ste subsequent levy phen Weeg, Administrator, on the bank. C. State Hos pital South, in their official and individ 301.6331-l(a)(l) (emphasis C.F.R. add- capacities, Defendants-Appellees. ual ed). levied, In when the IRS the bank- ruptcy obligation to trustee’s Mr. Al-Hadid No. 92-35255. yet was not “fixed” and “determinable.” It $30,000, capped Appeals, United States but not Court of fixed at that amount, any Ninth and no Circuit. one could then money determine how much Mr. Al-Hadid Argued and Submitted Nov. 1993. get. would The amount became fixed in April Decided when it was 1995. determined to be a much amount, $13,535.91. lower May As Amended ' examples provided The two regula- tion what illustrate the words “fixed and $13,-
determinable” mean. Mr. Al-Hadid’s
535.91 is not like the amount to become
payable at the end of the month from the buyer.
real estate That amount is fixed and
determined, though yet even payable. $13,535.91 closely analogous is more subsequently deposit. made bank
earlier does not make the bank liable to deposit.
the IRS for the later The bank does keep deposits
not need to track of into the
taxpayer’s they account as come in from the
taxpayer parties or third and remit them to Instead, IRS. has no effect on a
subsequent deposits. Mr. Hemmen is analo-