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    Davidson v. United States, 149 F.3d 1190, 10th Cir. (1998)

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    The United States Court of Appeals for the Tenth Circuit affirmed the district court's dismissal of Katherine Davidson's petition to quash an IRS summons issued to her bank for lack of subject matter jurisdiction. The IRS issued the summons to investigate deposits Davidson made to her bank account that may have come from funds fraudulently transferred by her husband to avoid paying assessed tax liability. The Court found that the summons was properly issued in aid of collecting her husband's tax liability without providing Davidson notice, so she had no right to challenge the summons in district court.

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    Davidson v. United States, 149 F.3d 1190, 10th Cir. (1998)

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    The United States Court of Appeals for the Tenth Circuit affirmed the district court's dismissal of Katherine Davidson's petition to quash an IRS summons issued to her bank for lack of subject matter jurisdiction. The IRS issued the summons to investigate deposits Davidson made to her bank account that may have come from funds fraudulently transferred by her husband to avoid paying assessed tax liability. The Court found that the summons was properly issued in aid of collecting her husband's tax liability without providing Davidson notice, so she had no right to challenge the summons in district court.

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    Filed: 1998-06-09 Precedential Status: Non-Precedential Citations: 149 F.3d 1190 Docket: 97-1244

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    The United States Court of Appeals for the Tenth Circuit affirmed the district court's dismissal of Katherine Davidson's petition to quash an IRS summons issued to her bank for lack of subject matter jurisdiction. The IRS issued the summons to investigate deposits Davidson made to her bank account that may have come from funds fraudulently transferred by her husband to avoid paying assessed tax liability. The Court found that the summons was properly issued in aid of collecting her husband's tax liability without providing Davidson notice, so she had no right to challenge the summons in district court.

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    25 views7 pages

    Davidson v. United States, 149 F.3d 1190, 10th Cir. (1998)

    Uploaded by

    Scribd Government Docs
    The United States Court of Appeals for the Tenth Circuit affirmed the district court's dismissal of Katherine Davidson's petition to quash an IRS summons issued to her bank for lack of subject matter jurisdiction. The IRS issued the summons to investigate deposits Davidson made to her bank account that may have come from funds fraudulently transferred by her husband to avoid paying assessed tax liability. The Court found that the summons was properly issued in aid of collecting her husband's tax liability without providing Davidson notice, so she had no right to challenge the summons in district court.

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    of 7

    F I L E D

    UNITED STATES COURT OF APPEALS


    TENTH CIRCUIT

    United States Court of Appeals


    Tenth Circuit

    JUN 9 1998

    PATRICK FISHER
    Clerk

    KATHERINE DAVIDSON,
    Petitioner-Appellant,
    v.
    UNITED STATES OF AMERICA,

    No. 97-1244
    (D.C. No. 97-K-158)
    (District of Colorado)

    Respondent-Appellee.
    ORDER AND JUDGMENT

    Before HENRY , Circuit Judge, HOLLOWAY , Senior Circuit Judge, and


    LUCERO , Circuit Judge.

    Petitioner Katherine Davidson appeals the district court's grant of the


    governments motion to dismiss for lack of subject matter jurisdiction. We
    review the question of a district courts subject matter jurisdiction de novo . . . .
    Fostvedt v. United States , 978 F.2d 1201, 1202 (10th Cir. 1992). Likewise, we
    review de novo the district courts interpretation of a federal statute.

    Utah v.

    Babbitt , 53 F.3d 1145, 1148 (10th Cir. 1995). Finding no error, we affirm.
    This order and judgment is not binding precedent, except under the
    doctrines of law of the case, res judicata, and collateral estoppel. The court
    generally disfavors the citation of orders and judgments; nevertheless, an order
    and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
    *

    I. STATEMENT OF FACTS
    The Internal Revenue Service (IRS) assessed federal income tax liability
    against Sidney Davidson, Ms. Davidson's husband. IRS Officer Eileen Newman
    conducted an investigation to locate assets to satisfy Mr. Davidsons tax liability.
    In the course of her investigation, Ms. Newman discovered that in 1992, Mr.
    Davidson had attempted to transfer his interest in his marital home to Ms.
    Davidson. Ms. Newman accordingly issued a summons to Ms. Davidsons bank
    to determine whether other such transfers had been attempted. In response to the
    summons, she received documentation indicating that in 1996, Ms. Davidson
    deposited a total of $51,126.85 into her account. Ms. Newman then issued a
    second summons, the one at issue in this case. The second summons sought
    information about the source of those deposits.
    Upon learning that the IRS served the summons on a third-party
    recordkeeper, i.e., her bank, Ms. Davidson filed this action in federal district
    court, seeking to quash the summons. The government filed a motion to dismiss
    for lack of subject matter jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(1). At a
    hearing, the district court granted the government's motion.

    II. DISCUSSION
    When an IRS summons issued to a third-party recordkeeper requires the

    production of any portion of records made or kept of the business transactions or


    affairs of any person . . . who is identified in the description of the records
    contained in the summons, then the person identified is entitled to notice of the
    summons. 26 U.S.C. 7609(a)(1). The IRS, however, is not required to give
    notice of the summons if
    (B) it is in aid of the collection of-(i) the liability of any person against whom an assessment has
    been made or judgment rendered, or
    (ii) the liability at law or in equity of any transferee or
    fiduciary of any person referred to in clause (i).
    26 U.S.C. 7609(c)(2). A person has the right to bring a proceeding to quash a
    summons only if he or she is entitled to notice. 26 U.S.C. 7609(b)(2). Thus, if
    a summons is issued in aid of collection, no notice is required, and the district
    court does not have subject matter jurisdiction over a petition to quash the
    summons.
    The government argues, and the district court agreed, that the summons was
    issued in aid of the collection of Mr. Davidsons unpaid assessed tax liability.
    Ms. Davidson, on the other hand, argues that the trial court construed the in aid
    of the collection exception too broadly because she herself has no tax liability,
    and the account was in her name alone. In support of her position, she cites
    Robertson v. United States , 843 F. Supp. 705 (S.D. Fla. 1993).
    In Robertson , the IRS issued a summons to Ms. Robertsons bank in

    connection with the tax liability of a couple named Sloan.

    Id. at 705. Ms.

    Robertson filed a petition to quash the summons, arguing that she had no legal or
    business relationship with the Sloans. Furthermore, she argued that the Sloans
    did not hold any legal or equitable interest in her bank account. The government
    filed a motion to dismiss for lack of subject matter jurisdiction, arguing that the
    summons was issued in aid of the collection of the Sloans tax liability. The
    district court denied the government's motion. In so doing, the court interpreted
    the in aid of the collection exception narrowly. That is, according to the
    Robertson court, the IRS must give notice unless the

    taxpayer whose tax liability

    has been assessed has a recognizable interest in the records summoned.

    Id. at

    706.
    The district court distinguished

    Robertson by noting that Ms. Robertson

    was not related to the taxpayers against whom liability had been assessed,
    whereas in the case at bar, the petitioner is married to the taxpayer. Aplts App.
    at 70. The district court instead relied on

    Serafine v. United States , No. C-81-

    1572-WTS, 1981 WL 1791 (N.D. Cal. Apr. 30, 1891). In

    Serafine , the IRS

    served a summons on the plaintiffs bank, seeking bank records concerning the
    plaintiff or her husband with respect to her husbands tax liability.

    Id. at *1. The

    plaintiff brought an action to enjoin the enforcement of the summons. The


    government moved to dismiss, and the district court granted the motion. The

    court noted that the government could establish that the summons was issued in
    aid of the collection of plaintiff's husband's taxes.

    Id. at *2. Furthermore, the

    court stated that it is manifest that plaintiff's bank records may produce relevant
    information with regard to a possible commingling of her funds with her
    husband's. Id. at *3.
    Ms. Davidson argues that

    Serafine is inapposite because that case arose in a

    community property state, whereas her case arose in a state where community
    property laws are not in effect. Whether or not community property laws apply,
    the fact remains that the statute does not require the IRS to give notice when it
    issues a third-party recordkeeper summons in aid of the collection of the liability
    of any person against whom an assessment has been made. 26 U.S.C.
    7609(c)(2)(B)(i) (emphasis added). Here, the IRS was investigating whether a
    taxpayer fraudulently transferred funds to his wife. We agree with the district
    court that the summons was issued in aid of the collection of Mr. Davidsons
    taxes and, therefore, that Ms. Davidson was not entitled to notice. Thus, the
    district court did not have subject matter jurisdiction to consider her petition.
    Ms. Davidson further argues that because the district court stated that she
    had standing, the court really did not grant the government's motion to dismiss for
    lack of subject matter jurisdiction, but, instead, denied her petition to quash on
    the merits. From a reading of the transcript of the hearing, we think it is plain

    that the district court simply misspoke when it stated that Ms. Davidson had
    standing. See Aplts App. at 70 (I will say that I find that the petitioner does
    have standing . . . .). From this statement, the district court was not implying
    that Ms. Davidson was entitled to notice of the summons. The hearing was
    clearly on the government's motion to dismiss for lack of subject matter
    jurisdiction. Aplts App. at 60 (The motion to dismiss for lack of jurisdiction
    must take precedence.) Moreover, at the close of the succinct motion hearing,
    the court stated that the summons was issued in aid of collection, and, therefore,
    no notice was required.

    Id. at 70.

    Although immediately after making this statement, the court said, The
    petition to quash is denied, it is clear that what the court was doing was granting
    the government's motion to dismiss the petition to quash.

    Id. Ms. Davidsons

    counsel never asked for a clarification of the court's ruling. In fact, Ms.
    Davidsons notice of appeal bears out the fact that counsel understood the court to
    be granting the government's motion. The notice of appeal states that Ms.
    Davidson appeals from a bench order granting the United States Motion to
    Dismiss Petition to Quash.

    Id. at 74. Because the district court correctly

    dismissed for lack of subject matter jurisdiction and never reached the merits of
    Ms. Davidsons case, we need not consider her second issue on appeal, namely,
    whether the summons satisfied the good faith requirements set forth in

    United

    States v. Powell , 379 U.S. 48 (1964).


    Finally, Ms. Davidson argues that because the courts ruling was, in
    actuality, a ruling on the merits, we must remand her case for the district court to
    enter findings of fact pursuant to Fed. R. Civ. P. 52(a). According to Rule 52(a),
    [i]n all actions tried upon the facts without a jury . . . the court shall find the
    facts specially and state separately its conclusions of law thereon . . . . We have
    already determined that the court did not rule on the merits, but, instead, granted
    the government's motion to dismiss for lack of subject matter jurisdiction.
    Findings of fact and conclusions of law are unnecessary on decisions of motions
    under Rule 12 . . . with exceptions not relevant here. Fed. R. Civ. P. 52(a).
    Thus, the district court was not required to enter findings of fact.
    For the foregoing reasons, we AFFIRM the judgment of the district court.
    Entered for the Court,

    Robert H. Henry
    Circuit Judge

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