United States v. Stephen C. Hemmen

The United States, acting through the Internal Revenue Service (“Service”), appeals the entry of judgment for Stephen Hemmen, bankruptcy trustee for Flavor Fresh Meals, Inc. (“Flavor Fresh”), in its action seeking $13,535.91 and interest for Hemmen’s failure to honor its levy with respect to the allowed administrative expense claims of the debtor’s president, Falah Tuba Al-Hadid (“Al-Hadid” or “taxpayer”), pursuant to 26 U.S.C. § 6332 (c)(1). The Service contends that the district court erred as a matter of law in concluding that Al-Hadid’s claims were “not a property right that was in Hemmen’s possession or that he was obligated to pay” at the time the notice of levy was served. The district court had jurisdiction pursuant to 28 U.S.C. §§ 1340 and 1345. We have jurisdiction pursuant to 28 U.S.C. § 1291 . We reverse.

*886 I

On June 23, 1983, the Service assessed a $70,132.89 civil tax penalty against Al-Hadid for failure to remit the income and social security taxes withheld from Flavor Fresh employees for the quarter ending on September 30,1982. At that time, Flavor Fresh was a Chapter 11 debtor. On May 30, 1984, the bankruptcy court entered an order allowing Al-Hadid’s…

51 F.3d 883 75 A.F.T.R.2d 95 -1646, 63 USLW 2626 , 95-1 USTC P 50,210 , Bankr. L. Rep. P 76,451 UNITED STATES of America, Plaintiff-Appellant, v. Stephen C. HEMMEN, Defendant-Appellee. No. 93-35643. United States Court of Appeals, Ninth Circuit. Submitted, Aug. 5, 1994 * . Decided April 7, 1995. Gary R. Allen, Robert L. Baker and William S. Easterbrook, Tax Div., U.S. Dept. of Justice, Washington, DC, for plaintiff-appellant. Stephen C. Hemmen, pro se, Tacoma, WA, for defendant-appellee. Appeal from the United States District Court for the Western District of Washington. Before: ALARCON, BEEZER and KLEINFELD, Circuit Judges. BEEZER, Circuit Judge: 1 The United States, acting through the Internal Revenue Service ("Service"), appeals the entry of judgment for Stephen Hemmen, bankruptcy trustee for Flavor Fresh Meals, Inc. ("Flavor Fresh"), in its action seeking $13,535.91 and interest for Hemmen's failure to honor its levy with respect to the allowed administrative expense claims of the debtor's president, Falah Tuba Al-Hadid ("Al-Hadid" or "taxpayer"), pursuant to 26 U.S.C. Sec. 6332 (c)(1). The Service contends that the district court erred as a matter of law in concluding that…

dissenting:

I respectfully dissent. I would affirm the district court’s judgment in favor of the trustee, Mr. Hemmen.

Mr. Al-Hadid, not Mr. Hemmen, owed the taxes. Mr. Hemmen can be obHgated only if, when the IRS levied upon him in 1985, he then owed Mr. Al-Hadid a fixed and deter *893 minable sum of money. When the IRS levied on Hemmen in 1985, Hemmen could not have paid Al-Hadid any money, and could not have paid the IRS any money. The two court orders purported to . award $30,000 in administrative expenses to Al-Hadid, but did not allow payment of any money to Al-Hadid except upon subsequent order, and did not establish that $30,000 would be the amount payable. In fact, Al-Hadid never became entitled to the $30,000 “allowed.” Instead, in 1987 the distribution to Al-Hadid was $13,-535.91.

The actual notice' of levy issued in 1985 ordered Hemmen to pay “money ... now in your possession and belonging to this taxpayer [Al-Hadid] (or for which you are obligated) and all money or other obligations owing from you to this taxpayer,” up to $93,576.93. If the majority analysis is correct, then the implication must be that when Hemmen received this notice of levy, he should have sent a…