WWSM Investors v. United States

Opinion by Judge THOMPSON: Dissent by Judge BRUNETTI.

ORDER

The government’s petition for rehearing is granted. The opinion filed May 31,1995 and published at 56 F.3d 1053 (9th Cir.1995) is withdrawn. The withdrawn opinion is replaced by a majority opinion and dissent which are filed concurrently with this order.

OPINION

The Internal Revenue Service (IRS) levied on WWSM’s bank accounts and seized $79,-004.90. WWSM did not owe the money to the IRS. A corporation named Advanced Plastics Engineering Corporation did. The money was owed for unpaid payroll taxes. WWSM had been Advanced Plasties’ creditor and had seized its assets by foreclosing on a security agreement which had priority over the IRS tax claim.

The IRS refused to return the money to WWSM, so WWSM brought suit in the district court. The suit was filed under 26 U.S.C. § 7426 , which permits a person to sue the government to get back property on which the government has wrongfully levied. The problem, however, was that WWSM did not file its wrongful levy action within the applicable statute of limitations. As a result, the district court granted summary judgment to the IRS.

WWSM sought leave to amend its complaint to…

dissenting:

I dissent. I beheve the majority opinion misreads United States v. Williams, — U.S. —, 115 S.Ct. 1611 , 131 L.Ed.2d 608 (1995), and erroneously concludes that it conflicts with our decision in Winebrenner v. United States, 924 F.2d 851, 855 (9th Cir.1991).

The district court correctly denied WWSM’s request for leave to amend to allege a claim for refund under 28 U.S.C. § 1346 , concluding that under Winebrenner , WWSM’s exclusive remedy was a claim for wrongful levy under 26 U.S.C. § 7426 and the statute of hmitations barred that claim. Winebrenner clearly shows that the exclusive remedy for a third party who claims an interest in property wrongfully levied on by the IRS is an action under § 7426. See 924 F.2d at 853-55 .

In Williams , the Supreme Court recognized that Williams could not use the remedy of 26 U.S.C. § 7426 because there was no levy. See — U.S. at-, 115 S.Ct. at 1618 . Williams involved an IRS assessment for certain tax liabilities. A lien, not a levy, was placed on the property. The taxpayer paid the tax liability to remove the lien so the property could be sold and sued the IRS for a refund.

The Supreme Court recognized Williams as a refund, not a…