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838 F.Supp 338, 78 AFTR 2d
96-7427 MILLER, ET AL. v. U.S Quincy Ashton MILLER, ET AL.,
PLAINTIFFS v. UNITED STATES OF AMERICA. DEFENDANT. DISPOSITION: Decision for Govt. 838 F.Supp
338. RELATED REFERENCES: Miller v. United States, 615 F.Supp. 781 (N.D. Ohio, June 13, 1985) (No. C 85-7412) JUDGE: CARR, District Judge: Order This
is a wrongful levy action brought pursuant to 26 U.S.C. section 7426 in which
plaintiffs, through their next friend and father, allege that the government
improperly seized property stored in a Netherlands safety deposit box. 1
Pending is defendant's motion for summary judgment. (Doc. 49). For the
following reasons, the government's motion shall be granted. Plaintiffs
are the children of David J. Miller (Miller), who pleaded guilty to and was
imprisoned for conspiring to import marijuana, filing false income tax returns,
and failing to report monetary instruments. See Miller v. Taylor, [967
F.2d 588,] 1992 WL 159451 (9th Cir.
1992) (affirming denial of parole and incarceration of 128 months). While
Mr. Miller was serving his sentence, the government undertook to collect taxes
Miller owed from his criminal activities. While doing so, the Internal Revenue
Service (IRS) looked overseas to a safety deposit box that Mr. Miller had
rented at the Raiffeisenbank bank in Baarn, Netherlands. Acting pursuant to a
1948 treaty with the Netherlands, 2 the government submitted a final revenue
claim to the Dutch government who, in accordance with Dutch law, confiscated
the contents in the safety deposit box. As stated by the government
“[t]he contents were auctioned and the net proceeds of the sale,
$15,615, was forwarded to the United States and ap-[pg.
96-7428]-plied to David Miller's liability,” 3 (Doc. 49 at 12).
Plaintiffs do not take issue with the procedures followed by the government in
assessing the tax deficiency or requesting assistance from the Dutch government
in the collection of Mr. Miller's debt in accordance with the treaty. Plaintiffs
do allege that they, as a result of a gift from their father, are the rightful
owners of the property found in the security deposit box. Plaintiffs also claim
that, because they are separate taxpayers not responsible for the debts of
their father, the government improperly levied on plaintiffs' property to
satisfy their father's tax debt. Plaintiffs state that neither they nor their
father received notice of the government's levy until after the seizure and
sale. To recover “the value of the property wrongfully
levied” plaintiffs bring the instant action under 26 U.S.C. section
7426(a)(1), which states: If a levy has been made on property or property has been
sold pursuant to a levy, any person...who claims an interest in … such
property and that such property was wrongfully levied upon may bring a civil
action against the United States in a district court of the United States. Having
had its motions to dismiss for lack of subject matter jurisdiction (Doc. 21)
and failure to state a claim (Doc. 44) denied by this Court, the government
now, having engaged in a substantial amount of discovery and investigation,
moves for summary judgment on the grounds that: (1) plaintiffs' action is
barred by the nine- month statute of limitations codified at 26 U.S.C. section
6532 4 and (2) the process of determining ownership of the levied property
violates the act-of-state doctrine. Because I find the statute of limitations,
if it applies at all, to have commenced and expired, the government's motion
shall be granted. As a
threshold matter, I must decide if the seizure of the property is even subject
to the constraints imposed by the Internal Revenue Code. The government argues
“when the Dutch seize property pursuant to the treaty, there is no
requirement that the IRS issue a notice of levy.” (Doc. 49 at 16), I
agree. According
to the language of the treaty, once the government procures the assistance of a
foreign government in the collection of taxes, such collection occurs
“in accordance with the laws applicable to the enforcement and
collection of its own taxes.” United States-Netherlands Treaty, Art.
XXII(2). Thus, on agreeing to assist the United States, the Dutch will act
pursuant to Dutch “not United States” law. In
this case, the government properly requested “assistance and
support” from the Netherlands in the collection of Mr. Miller's tax
debt. Prior to requesting such assistance, the government undertook to make a
final determination of Miller's tax debt. After making this final
determination, the government submitted, with proper documentation, a request
to the Dutch authorities for assistance. Although not required to lend
assistance, see United States v. Van Der Horst, 270 F. Supp. 365, 369 [20 AFTR 2d 5598] (D. Del. 1967), the
Dutch government agreed to assist in the collection of the debt. After
agreeing to assist, Dutch law governs the actions of the Dutch. Pursuant to the
law of the Netherlands, the Dutch authorities seized the property from the
deposit box, exchanged the U.S. currency, auctioned the stamp collection, and
transferred the proceeds to the United States government after subtracting the
costs as-[pg. 96-7429]-sociated with the
seizure and sale. The legality of this cooperative endeavor pursuant to valid
international treaty is not contested. Other
than submitting the initial request for assistance and providing the required
documentation, the United States had no involvement in the seizure and sale of
the property. The tasks of seizing and selling the property were undertaken by
the Dutch government pursuant to Dutch law. As such, I conclude that the IRC
notice requirements do not apply. Instead, the notice requirements of Dutch law
would apply. In
apparent fulfillment of those requirements, the Dutch authorities sent a letter
with a copy of the garnishment writ to Miller. He received that notice and
ultimately came to understand that property had been seized from a safety
deposit box bearing his name at the Raiffeisenbank Bank in Baarn, Netherlands.
The documents accompanying the government's motion indicate that the Dutch
followed their own laws regarding post-seizure notice and the plaintiffs do not
argue or present evidence to the contrary. If
plaintiffs seek to contest the legality of the seizure and sale by the Dutch
government, they should do so via the Dutch judicial system. Presumably, if the
Dutch government violated its law and plaintiffs receive a favorable judgment
against the Dutch government, then the Dutch government could seek the recovery
of the proceeds from the United States. In any event, adjudication of the
legality of the Dutch seizure under Dutch law would require this court to
inquire into “the validity of [a] public act[] [that] a recognized
foreign sovereign power committed within its own territory,” thereby
violating the act-of-state doctrine. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401 (1964). I conclude,
therefore, that the IRC in general and its notice provisions in particular do
not apply. Plaintiffs' dispute is, in essence, with the acts of the Dutch
officials and the operation of Dutch law. The IRC has no authority over those
officials or their actions. The act-of-state doctrine protects the Dutch
officials, in any event, from being answerable to the plaintiffs in this court. Nevertheless,
even if the notice requirements of the IRC apply, I conclude that the notice
received by Miller was sufficient to trigger the commencement of the limitations
period. Thus, I agree with the government that plaintiffs' claim is time barred
for failure to file within the statutorily allotted time period. The
pertinent statute of limitations is found in 26 U.S.C. section 6532(c)(1):
“no suit or proceeding under section 7426 shall be begun after the
expiration of 9 months from the date of the levy or agreement giving rise to such
action.” As explained in an earlier order, “the date of the
levy” with respect to tangible property or statue of limitations
purposes is “the date on which the notice of seizure provided in section 6335(a) is
given.” Miller v. United States, 838
F. Supp. 338, 339 [72 AFTR 2d 93-5766] (N.D. Ohio 1993) (emphasis added,
quoting 26 U.S.C. section 6502(b)). Section
6335(a) states: As soon as practicable after seizure of property, notice
in writing shall be given by the Secretary to the owner of the property (or, in
the case of personal property, the possessor thereof), or shall be left at his
usual place of abode or business if he has such within the internal revenue
district where the seizure is made. If the owner cannot be readily located, or
has no dwelling or place of business within such district, the notice may be
mailed to his last known address. Such notice shall specify the sum demanded
and shall contain, in the case of personal property, a description with
reasonable certainty of the property seized. Thus,
on receiving notice of the seizure from the Secretary, the section 7426
claimant has nine months to file the claim or else such claim will be time
barred. In
support of its argument that plaintiffs' claim is barred by the statute of
limitations, the government has presented evidence that the Dutch government
delivered a copy of the “garnishment order” to [pg. 96-7430]
David Miller on January 16, 1991. Miller who is not versed in the language of
the Dutch, wrote the Netherland's Consulate General in Los Angeles requesting
an explanation of the order. Eventually, by February 19, 1991, Miller came to
understand that “property” was taken from the Raiffeisenbank
at Baarn and sold to satisfy in part or whole some tax obligation.”
(Doc. 50, Exch. 17 at 8.) At that time, Miller wrote “I have no
property, nor have ever and any property, in the Raiffeisenbank at Baarn, but
[m]y children have property there (or did have) under control of my Wife Mary
Miller.” Id. Unlike their father, plaintiffs, who appear to have been very young
at the time, never received notice that the property was seized and sold, with
the proceeds ultimately sent to the United States government. 5 From
the applicable rules of law and facts presented, a two-part analysis emerges.
This analysis will determine whether, as the government argues, the statutory
limitation period commenced and expired, thereby requiring this Court to grant
defendant's motion for summary judgment. First, must plaintiffs receive notice
of the seizure, or is David Miller's receipt of notice sufficient to trigger
the commencement of the statute of limitations period? Second, if it is
sufficient for just David Miller “and not plaintiffs” to
receive notice, did notice of the seizures from the Dutch government satisfy
the statutory requirements so as to trigger the running of the limitations
period? If plaintiffs must receive notice, or if the notice Miller received is
statutorily insufficient, then the government is not entitled to judgment as a
matter of law, and the motion, if the IRC applies, must be denied. But, on the
other hand, if plaintiffs, as allegedly putative owners, are not required to
receive notice, and the notice received by Miller was statutorily sufficient,
then plaintiffs' claim will be barred by the statute of limitations, and the
government is entitled to judgment as a matter of law. 6 Because I conclude
that there is no requirement in this case that plaintiffs themselves receive
notice and the notice received by David Miller comported with section 6335(a),
the government's motion for summary judgment shall be granted. First,
there is no requirement in the statute that plaintiffs must receive notice of
the seizure. Plaintiff argue that the government was statutorily required to
give notice of seizure to any known putative owners….” (Doc.
54 at 8). I disagree. There is no statutory requirement that plaintiffs, as
“known putative owners,” must receive notice of seizure
pursuant to section 6335(a). When the seizure involves personal property, the
statute requires that notice be sent to the “possessor” of
the property. Furthermore, service of notice “need not be made upon
potential third party owners” to satisfy the notice provisions of the
federal tax law. William L. Comer Family Equity Trust v. United States, 732 F. Supp. 755, 760 [66 AFTR 2d 90-5023] (E.D. Mich.
1990); see also Douglas v. United States, 562
F. Supp. 593 [51 AFTR 2d 83-919] (S.D. Ga. 1983) (“the IRS is under no
duty, constitutional or otherwise, to notify every person claiming an interest
in property levied upon”). In
this case, David Miller was the “possessor” of the personal
property found in the deposit box. It is undisputed that David Miller rented
the safety deposit box, and the safety deposit box was registered in his name.
Even if plaintiffs claimed a property interest in the contents seized from the
box, they are merely “third party owners” who are not
required to be served. Plaintiffs do not assert that they leased the box or
registered the box in their names. And the fact that plaintiffs' names
allegedly ap- [pg. 96-7431] peared on the envelopes and stamp collection cannot
mean that plaintiffs “possessed” the property. As the named
renter of the box, David Miller was also in possession of its contents; he was
therefore, the only individual who is statutorily required to be served with
notice of the seizure. Aside
from the technical differences between David Miller as
“possessor” and plaintiffs as “third party
owners,” there is a practical aspect to this case as well. If David
Miller, as plaintiffs allege, conveyed ownership of the property to plaintiffs
and subsequently stored the property for plaintiffs in a safety deposit box
leased in his name, he essentially became the guardian or trustee of such
property. 7 Because David Miller, with respect to the stored property, knew
more than plaintiffs about the contents, value, and existence of the property,
giving notice to David Miller, as opposed to plaintiffs, actually increased the
probability that the property might be protected from a wrongful governmental
seizure. After all, it would have done little good to serve notice on the
plaintiffs who were not even teenagers at the time of the seizure. The
plaintiffs could have done little, if anything, to secure their property. Had
they known and understood the circumstances of the seizure, plaintiffs would
likely have contacted their father in any event. To
argue that plaintiffs must receive notice in this case is especially
disingenuous because, in reality, it David Miller, as next friend and father,
that brings this suit on behalf of plaintiffs. In reality, notice was given to
a person who could —and ultimately did — bring suit for
return of the seized property. The truth of the matter is that had plaintiffs
— and only plaintiffs —been given notice, the statutory
limitation period would have been more — not less — likely to
expire without an opportunity to challenge the seizure. Second,
I conclude that the notice given — sent by the Dutch government and
received by David Miller — was sufficient to trigger the statute of
limitations period. The Second Circuit's discussion of section 6335(a) in Kaggen
v. I.R.S., 71 F.3d 1018 [76 AFTR 2d 95-7777] (2d
Cir. 1995) is, in my view, persuasive as to the issue of whether David Miller
received notice in conformity with the statutory requirements of section
6336(a). As stated by the court in Kaggen: notice in writing shall be given by the Secretary to the
owner, or shall be left at the owner's usual place of abode or business. Here,
the IRS concedes that the Secretary did not provide such notice of seizure.
However, the notices of levy and the bank statements were all received by
taxpayers in writing. Therefore, assuming that these documents communicated the
information required by section 6335(a), a point to be discussed next, the
first requirement of that section has been met. The
decision in Kaggen,
therefore, stands for the proposition that so long as “written”
notice is “received by the taxpayer” and this notice
communicates “the information required,” the fact that it was
not sent by the Secretary will not be fatal to a finding of sufficient notice. In the
instant case, written notice was sent to a post office box at Miller's place of
abode: the Federal Prison Camp in Boron, California. Miller received the
notice, as indicated by his letters to the Dutch Consulate in Los Angeles
requesting translation assistance. The notice contained the
“information required,” inasmuch as a there was “an
account of the property seized.” 26 U.S.C. section 6335(a). By
February 19, 1991, David Miller under- [pg. 96-7432] stood that personal
property had been seized from the safety deposit box in Baarn, Netherlands.
There is no evidence on the record to indicate that Miller misunderstood or was
confused as to what safety deposit box the order referred. As in
Kaggen, the fact that Miller's notice came from someone other than the
Secretary is not fatal to a finding of adequate notice so as to trigger the
commencement of the limitations period. In Kaggen, the court determined that a
monthly account statement from a bank provided statutorily sufficient notice to
the taxpayer. If a bank statement can convey the information necessary to put a
potential claimant on notice, then garnishment order from Dutch tax officials
and a notification statement from the Dutch General Consulate can likewise
provide notice to a potential claimant. Even though the order and notification
statement were originally written in a foreign language, Miller sought
assistance with the translation and was quickly apprised of the circumstances.
In this situation, the notice sufficed to inform a reasonably prudent individual
about the circumstances of the seizure. In
sum, on receiving adequate notice per section 6335(a), the nine month statute
of limitations period commenced, thus giving plaintiffs until November 19, 1991
to file suit. Plaintiffs ultimately filed suit on January 8, 1993. Because
limitations period expired before plaintiffs filed suit, the instant action is
time barred, and the government is entitled to judgment as a matter of law.
Therefore, for this reason as well, the government's motion for summary judgment
shall be granted. For
the foregoing reasons, it is Ordered
That defendant's motion for summary judgment shall be, and hereby same is
granted. So
Ordered. FN1
The parties agree that the property found in the safety deposit box included
$10,000 in United States currency, a stamp collection, and a gold coin. (Doc.
50, Exh. 13 at 12-13). FN2
This treaty between the United States and the Netherlands entitled the
“US-Netherlands Income Tax Convention of 1948” states at
Article XXII: (1) The Contracting States [United States and the
Netherlands] undertake to lend assistance and support to each other in the
collection of the taxes which are the subject of the present Convention,
together with interest, costs, and additions to the taxes and fines not being
of a penal character. (2) In the case of applications for enforcement of taxes,
revenue claims of each of the Contracting States which have been finally
determined may be accepted for enforcement by the other Contracting States and
collected in that State in accordance with the laws applicable to the
enforcement and collection of its own taxes. The State to which application is
made shall not be required to enforce executory measures for which there is not
provision in the laws of the State making the application. (3) Any application shall be accompanied by documents
establishing that under the laws of the State making the application the taxes
have been finally determined. (4) The assistance provided for in the Article shall not
be accorded with respect to the citizens, corporations, or other entities of
the States to which application is made, except as is necessary to insure that
the exemption or reduced rate of tax granted under the convention to such
citizens, corporations or to the entities shall not be enjoyed by persons not
entitled to such benefits. (Doc.
50 at Exh. 15). FN3
According to Dutch officials: On January 16, 1991, the Dutch IRS confiscated at the
expense of the tax debtor the contents of the safe deposit box at the R&BO
Bank in Baarn, that had been rented by the tax offender and his wife. A copy of
this garnishment order was also sent to the tax offender. The contents of the
safe deposit box consisted of dollar bills and a stamp collection. In
conformity with the legal regulations, the dollar bills were traded in and the
stamps were auctioned. The American authorities were informed about on May 20,
1992, (Doc.
49, Exh. 13 at 2). Based on this statement, it appears that Dutch, not United
States, officials opened the deposit box, seized the property, auctioned the
stamps, and exchanged the dollars. After accomplishing those tasks, the Dutch
authorities forwarded a fixed amount of money to the United States less the
expenses associated with the Dutch activities. FN4
Although the government already presented — and this Court denied
— the statute of limitations argument, Miller v. United States, 838 F. Supp. 338, 340 [72 AFTR 2d 93-5766] (N.D. Ohio 1993),
that prior order specifically noted that “defendant may, if it
desires, renew its effort [to dismiss based on the statute of limitations] by
way of a motion for summary judgment.” After further discovery, the
record is sufficiently complete to make a determination regarding the statute
of limitations argument. FN5
The government admits it never sent notice to the plaintiffs or to their
father. (Doc. 55 at 5) (“the Internal Revenue Service did not issue
notice a notice of seizure after the property was seized”). In defense
of its failure to send a notice of seizure, the government contends that
“the terms of the treaty are clear” and it is the Dutch
government, not the IRS, that is required to send notice of seizure, which is
what was done in this case. FN6
Plaintiffs, in their response brief, state “[b]ecause the statute of
limitations was tolled in this case by virtue of the government's failure to
serve the statutorily required notice on Plaintiffs, the statute of limitations
has not run and the action is to barred.” (Doc. 54 at 9). The proper
framework in which to analyze this issue, however, is not to see whether the
statute has tolled, but rather to see if the statute of limitations commenced
in the first place. The precise issue at stake is whether adequate notice was received
by plaintiffs or their father so as to justify the commencement — and
subsequent expiration — of the limitations period. Plaintiffs
“tolling” argument seems to imply that the statute commenced
and them, for some later reason, that statute stopped or tolled, thus
preventing its expiration. FN7
If David Miller's delay in bringing suit caused injury to his children, then
his children may have a cause of action not against the United States or the
Netherlands, but against David Miller himself as trustee of plaintiffs'
property. Miller's conduct, namely placing his minor children's property in a
safety deposit box registered in his name in a foreign nation, arguably
constitutes conduct that “manifests an intention to create a trust.”
Restatement Second, Trusts sections 23-24. If in fact Miller created a trust
for his children, he arguably breached at least three duties when he failed to
bring suit within nine months of receiving notice that the property had been
seized: breach of a duty to exercise reasonable care and skill, duty to
preserve the trust property, and duty to defend actions which may result in a
loss to the trustee estate. Id. section 174, 176, 178. Consequently, by
breaching his fiduciary duties as trustee of his children's property, Miller
may be amenable to suit by his children to recover “any loss or
depreciation in value of the trust estate resulting from the breach of
trust.” Id. section 205. |