
USCA1 Opinion

	




                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 94-1070                                   JOHN F. MURPHY,                                Plaintiff, Appellant,                                          v.                              UNITED STATES OF AMERICA,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Edward F. Harrington, U.S. District Judge]                                               ___________________                                 ____________________                                        Before                                  Cyr, Circuit Judge,                                       _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Stahl, Circuit Judge.                                         _____________                                 ____________________            Stephen  J.  Lyons with  whom Klieman,  Lyons, Schindler,  Gross &            __________________            ____________________________________        Pabian was on brief for appellant.        ______            Kenneth W.  Rosenberg, Attorney, Tax  Division, with  whom Loretta            _____________________                                      _______        C. Argrett, Assistant  Attorney General, Gary R. Allen  and Kenneth L.        __________                               _____________      __________        Greene, Attorneys, Tax  Division, Department of Justice  and Donald K.        ______                                                       _________        Stern, United States Attorney, were on brief for appellee.        _____                                 ____________________                                   January 25, 1995                                 ____________________                      STAHL,  Circuit Judge.  This appeal arises from the                      STAHL,  Circuit Judge.                              _____________            dismissal  of  a  suit  brought by  plaintiff-appellant  John            Murphy for a tax refund  and damages stemming from an alleged            illegal or erroneous  tax collection.  Because  we agree with            the  district court  that  Murphy has  failed to  establish a            waiver of sovereign immunity, we affirm.                                          I.                                          I.                                          __                                      Background                                      Background                                      __________                      Prior to 1972,  Murphy formed Capeway  Construction            Company  ("Capeway") as a partnership with Edward Laffey.  In            1972, Capeway failed  to submit payroll taxes  to the federal            government for  the quarters ending on June  30 and September            30 of that year.  At the end of 1972, Capeway  terminated its            business,  leaving an  outstanding payroll  tax liability  of            $9,442.13.  Capeway's sole remaining asset at that time was a            parcel of real estate located in Easton, Massachusetts, which            Capeway had acquired  in 1971 for approximately  $5,000 ("the            Property").    The Capeway  Property was  subject to  a first            mortgage in favor of Wingate and Louise Chadbourne.                      In  January  1974,  the  Internal  Revenue  Service            ("IRS") assessed  Capeway $13,994.09  for the  unpaid payroll            tax  liability.    Because  Capeway  failed  to  satisfy  the            obligation,  the IRS  looked  to Murphy  and  Laffey who,  as            partners, were  individually  liable for  the tax  liability.            See 26 U.S.C.   6671(b).             ___                                         -2-                                          2                      In April 1974,  the IRS served the partners  with a            notice  of seizure of the Property.   Prior to service of the            notice, two  IRS officers had advised Murphy  that the agency            intended to sell  the Property and apply the  proceeds to the            outstanding tax liability.  In  August 1974, the IRS filed an            action  against Murphy and  Laffey in federal  district court            seeking judgment in the amount of the  payroll tax liability.            On July 25, 1977, the district court entered judgment against            Murphy and Laffey  in the amount  of $19,711.221 and  ordered            the foreclosure and sale of the Property at public auction by            the U.S. Marshal.  The order specified  that a minimum bid of            $4,000 would be  required at the auction.   The order further            stated that, after paying the costs of the sale, the proceeds            were to be applied first to satisfy the  outstanding mortgage            on the Property, then to cover the costs of the United States            in the action, and finally to the outstanding judgment.2                      In  1977,  the  U.S.  Marshal's  office   made  two            unsuccessful  attempts  to  sell the  Property.    No further            effort to sell  the Property was ever undertaken.3   Over the                                            ____________________            1.  This  amount  purported  to  account  for  $13,994.09  in            outstanding  taxes,  penalties,  and  interest; $6,020.53  in            statutory additions; and $335.24 for the costs of the action.            2.  The order, which  Murphy attached to the  complaint, also            stated   that,  if  any   surplus  remained,  it   should  be            distributed "pursuant to a further Order of the Court."            3.  Subsequently, Edward  Laffey was released  from liability            due to his inability to pay.                                         -3-                                          3            course of the next eight years, the IRS never notified Murphy            that  the Property  had not  been sold,  and Murphy  does not            allege that  he ever  inquired as to  the disposition  of the            Property.  The record does  not disclose what happened to the            local tax bills on the property during the intervening years.            We assume  that the taxes  were not paid, for  in 1985, after            the IRS  released its  federal tax lien,  the Town  of Easton            foreclosed  on  the  Property  pursuant  to  a  final  decree            obtained  in  Massachusetts state  court  against  Murphy and            Laffey for their failure to  pay the local real estate taxes.            The  IRS did  not  notify  Murphy that  it  had released  its            federal tax lien.                      In  December 1989, the  IRS resumed its  efforts to            collect the unpaid payroll taxes by issuing a final notice of            tax due to  Murphy for the  sum of $43,468.98.   On July  16,            1990, Murphy  received a  second final  notice, which  stated            that the sum due was $19,311.97.  On August  20, 1990, Murphy            made a  payment to the IRS in the amount of $19,351.74, which            purported  to satisfy in  full his obligation  as responsible            party for Capeway's outstanding payroll tax liability.4                        On  September  5,  1990,   Murphy  filed  a  refund            application with  the IRS, claiming  that the seizure  of the                                            ____________________            4.  Though it is not entirely clear from the record, Murphy's            counsel at oral argument stated that both parties agreed that            this  payment did in  fact fully satisfy  Murphy's obligation            for the  1972 payroll  taxes.   Government's counsel  did not            dispute this statement.                                         -4-                                          4            Property and its  ordered sale should have  rendered proceeds            adequate to satisfy his tax liability.  On March 5, 1992, the            IRS disallowed  his application.    On July  1, 1992,  Murphy            filed a second  application for refund on which  the IRS took            no action.  On March 9,  1993, Murphy filed this suit against            the United States  seeking a refund and other relief pursuant            to 28 U.S.C.   1346(a)(1) and 26 U.S.C.    7430 and 7433.  In            his  Complaint,  Murphy  alleged   that  the  government  had            exercised  "dominion and control"  over the Property  and had            "breached its obligation  to liquidate and/or dispose  of the            property  in  a  reasonable  manner."    The  district  court            dismissed the suit on motion of the United States for lack of            subject matter jurisdiction.  This appeal followed.                                         II.                                         II.                                         ___                                      Discussion                                      Discussion                                      __________                      Murphy contends that  the district  court erred  in            dismissing  his suit for lack of subject matter jurisdiction.            He  claims that  jurisdiction  obtained  under  28  U.S.C.               1346(a)(1)  for a refund  of erroneously collected  taxes and            under 26 U.S.C.    7433 for  damages.  We  first outline  the            doctrine  of sovereign immunity and the requisite standard of            review, and then proceed to discuss each argument in turn.                      It  is  well  settled that  the  United  States, as            sovereign, may not be sued without its consent.  E.g., United                                                             ____  ______            States v. Dalm, 494 U.S.  596, 608 (1990).  Jurisdiction must            ______    ____                                         -5-                                          5            be  found in an  express Congressional waiver  of immunity or            consent to be sued.   See, e.g., United States v. Mottaz, 476                                  ___  ____  _____________    ______            U.S.  834, 841 (1986);  Sibley v. Ball, 924  F.2d 25, 28 (1st                                    ______    ____            Cir.  1991).  In general, statutes waiving sovereign immunity            should  be strictly construed in favor  of the United States.            See United  States v.  Michel, 282  U.S. 656, 659-60  (1931);            ___ ______________     ______            Gonsalves  v. IRS,  975  F.2d  13, 15  (1st  Cir. 1992)  (per            _________     ___            curiam); Schon v. United States,  759 F.2d 614, 617 (7th Cir.                     _____    _____________            1985).  See also Charles A. Wright et al. 14 Federal Practice                    ___ ____                             ________________            and Procedure    3654 at 194-95 (2d  ed. 1985).   "Courts may            _____________            not `enlarge . .  . beyond what the language [of  the statute            creating the  waiver] requires.'"  Gonsalves, 975  F.2d at 16                                               _________            (alterations  in original)  (quoting Eastern  Transp.  Co. v.                                                 _____________________            United States, 272 U.S. 675, 686 (1927)).            _____________                      We  review de novo a district court's dismissal for                                 __ ____            lack of  subject  matter jurisdiction  under Fed  R. Civ.  P.            12(b)(1).  Negron-Gaztambide v. Hernandez-Torres, 35 F.3d 25,                       _________________    ________________            27 (1st Cir.  1994), petition  for cert.  filed, 63  U.S.L.W.                                 ________  ___ _____  _____            3477 (December 8, 1994) (No. 94-1019).  Our review is similar            to that  accorded a  dismissal for failure  to state  a claim            pursuant to Fed. R. Civ. P. 12(b)(6).  See Scheuer v. Rhodes,                                                   ___ _______    ______            416 U.S. 232,  236 (1974); Negron-Gaztambide, 35  F.3d at 27.                                       _________________            In  reviewing  the  dismissal,  we   construe  the  Complaint            liberally and treat all well-pleaded facts as true, according            the plaintiff the benefit of all reasonable inferences.  See,                                                                     ___                                         -6-                                          6            e.g., K.W. Thompson Tool Co.  v. United States, 836 F.2d 721,            ____  ______________________     _____________            726  (1st Cir.  1988).   A plaintiff,  however, may  not rest            merely  on  "unsupported  conclusions  or interpretations  of            law."  Washington  Legal Found. v. Massachusetts  Bar Found.,                   ________________________    _________________________            993  F.2d   962,  971   (1st  Cir.   1993).     "[S]ubjective            characterizations  or  conclusory descriptions  of  a general            scenario  which could be  dominated by unpleaded  facts" will                            _____            not defeat a motion to dismiss.  Coyne v. City of Somerville,                                             _____    __________________            972  F.2d 440,  444  (1st  Cir.  1992)  (internal  quotations            omitted).  Finally,  we conduct our review "mindful  that the            party  invoking the jurisdiction  of a federal  court carries            the burden of  proving its existence."  Taber  Partners, I v.                                                    __________________            Merit  Builders, Inc.,  987  F.2d 57,  60  (1st Cir.),  cert.            _____________________                                   _____            denied, 114 S. Ct. 82 (1993).            ______            A.  The 28 U.S.C.   1346(a)(1) Claim.            _____________________________________                      Murphy first contends that the district court erred            because jurisdiction lies under 28 U.S.C.   1346(a)(1), which            waives  sovereign immunity  for  tax-refund suits.5    Murphy                                            ____________________            5.  28 U.S.C.   1346 provides in relevant part:                      (a)  The   district  courts   shall  have                      original  jurisdiction,  concurrent  with                      the  United   States  Court   of  Federal                      Claims, of:                           (1)  Any  civil action  against  the                      United  States for  the  recovery of  any                      internal-revenue tax alleged to have been                      erroneously  or  illegally   assessed  or                      collected, or any penalty claimed to have                      been collected  without authority  or any                                         -7-                                          7            does not dispute  his obligation for the  outstanding payroll            taxes or the amount of  that obligation.  Neither does Murphy            contend that  the government obtained anything of  value as a            result of  its dealings with  the Property.   Essentially, he            argues that, by virtue of  the notice of seizure, the ensuing            court order of foreclosure and the failure of the IRS to keep            Murphy  informed, the  IRS took  effective  ownership of  the            Property without according  him proper credit for  its value.            In other words,  the actions of the government  amounted to a            de facto (and erroneous) collection of the Property entitling            Murphy to a refund.  We disagree.                      Assuming    arguendo     that,    under     certain                                  ________            circumstances,  the conduct  of  the IRS  with  respect to  a            seizure of property could constitute a de facto collection of            owed  taxes, Murphy  does  not  allege  facts  sufficient  to            support such  a  claim.   First  of all,  Murphy's  Complaint            asserts  only that  the  IRS  issued  a  notice  of  seizure,            subsequently  obtained  an  order  of  foreclosure  from  the            district  court, and  failed to  keep  Murphy informed.   The            Supreme Court,  however, has held  that the IRS's  seizure of            property  does not  effect a transfer  of ownership.   United                                                                   ______            States v.  Whiting Pools, Inc.,  462 U.S. 198,  209-11 (1983)            ______     ___________________            (bankruptcy  action).  "Ownership of the [seized] property is                                            ____________________                      sum alleged  to have been excessive or in                      any manner wrongfully collected under the                      internal-revenue laws.                                         -8-                                          8            transferred only  when the  property is sold  to a  bona fide            purchaser at a tax sale."  Id. at 211.  Therefore, prior to a                                       ___            successful  auction, the ownership  of the  Property remained            with Capeway.                      Moreover, Murphy's assertion that the IRS failed to            notify  him that the auctions  were unsuccessful can give him            no  comfort.  The  district court's order  directing the U.S.            Marshal's  office to sell the Property explicitly stated that            a  minimum bid  of $4,000  was  required.   This clearly  put            Murphy  on notice of the possibility that the ordered auction            might not be successful.                       Finally, though Murphy's Complaint  states that the            IRS  exercised  "dominion  and  control"  over  the  Property            subsequent  to  the  two unsuccessful  auction  attempts,  it            alleges  no facts  in support  of  the conclusory  statement.            Murphy has  not alleged  conduct analogous  to taking  title,            insuring  and  renting  the property,  see  United  States v.                                                   ___  ______________            Pittman, 449 F.2d 623, 627  (7th Cir. 1971), or negotiating a            _______            payment   agreement   directly   with  debtors   on   account            receivables, see  Barlow's, Inc.  v. United  States, 36  B.R.                         ___  ______________     ______________            826,  829 (Bankr.  E.D. Va.),  aff'd, 53  B.R. 986  (E.D. Va.                                           _____            1984),  aff'd,  767  F.2d  1098 (4th  Cir.  1985).6    Though                    _____                                            ____________________            6.  In contrasting  Murphy's  allegations  to  the  facts  of            Pittman and Barlow's,  we do not hold that  the conduct found            _______     ________            in those cases  would necessarily support jurisdiction  for a            refund suit under  28 U.S.C.   1346(a)(1).  We cite them only            to illustrate the point that Murphy has alleged no facts that                                         -9-                                          9            essentially  asserting  that  the  conduct  of  the  IRS  was            sufficient to  cause him  to believe that  the IRS  had taken            effective ownership of  the Property, Murphy pleads  no facts            to illustrate what  that conduct was.   Murphy's claim cannot            rest  solely on the  unsubstantiated conclusion that  the IRS            exercised "dominion and control."                      Therefore,  because  Murphy's Complaint  cannot  be            construed  as  asserting  a claim  for  erroneous  or illegal            collection  of  taxes  (as  the  IRS did  not  "collect"  the            Property), Murphy's claim  cannot be considered a  tax refund            suit.  Accordingly, no jurisdiction  exists under 28 U.S.C.              1346(a)(1).  See  Cleveland Chair Co.  v. United States,  526                         ___  ___________________     _____________            F.2d 497, 498-99  (6th Cir. 1975) (no  jurisdiction in refund            suit  where  dispute  centers  on  non-action  of  a  federal            official   in  his  capacity  as   a  custodian  and  not  on            overpayment of  taxes);  Film Truck  Serv. v.  Nixon, 216  F.                                     _________________     _____            Supp.  77, 78  (E.D. Mich.  1963) (no jurisdiction  in refund            suit  where Complaint alleges government failed to dispose of            seized property in most productive way possible).            B.  The 26 U.S.C.   7433 Claim.            _______________________________                                            ____________________            support  his claim  that  the  IRS  exercised  "dominion  and            control"  over  the  Property.   Furthermore,  the  cases are            distinguishable in that  neither arose as a refund  suit by a            taxpayer.  See Pittman, 449  F.2d at 624 (action to foreclose                       ___ _______            federal tax liens brought by the United States) and Barlow's,                                                            ___ ________            36 B.R.  at 826  (motion in bankruptcy  action to  reduce tax            lien subsequent to the IRS's filing of a proof of claim).                                          -10-                                          10                      Murphy's claim for relief under 26 U.S.C.   7433 is            equally  unavailing.7   Congress  enacted     7433  "to  give            taxpayers `a specific  right to bring  an action against  the            Government for damages sustained due to unreasonable  actions            taken  by an  IRS  employee.'"   Gonsalves,  975  F.2d at  15                                             _________            (quoting H.R. Conf. Rep. No.  1104, 100th Cong., 2d Sess. 228            (1988)).  Congress provided, however, that the statute should            apply to actions occurring after the date of enactment, which            was November 10,  1988.  Id.  at 17-18.   Because all of  the                                     ___            conduct  of which Murphy complains (i.e., seizure and failure            to  sell the  Property,  failure to  notify  Murphy that  the            auctions were unsuccessful,  and release of tax  lien without            notice to Murphy) occurred well before the date of enactment,            26  U.S.C.   7433 does not  provide jurisdiction for Murphy's            claims.                                         III.                                         III.                                         ____                                            ____________________            7.  26 U.S.C.   7433 provides in relevant part:                           (a) In  general - If,  in connection                               In  general                      with any  collection of Federal  Tax with                      respect  to  a taxpayer,  any  officer or                      employee of the  Internal Revenue Service                      recklessly  or  intentionally  disregards                      any  provision  of  this  title,  or  any                      regulation promulgated under  this title,                      such  taxpayer may  bring a  civil action                      for damages against the  United States in                      a district  court of  the United  States.                      Except as provided  in section 7432, such                      civil  action  shall   be  the  exclusive                      remedy for  recovering damages  resulting                      from such actions.                                          -11-                                          11                                      Conclusion                                      Conclusion                                      __________                      For  the foregoing  reasons,  the district  court's            dismissal is affirmed.  Costs to appellees.                                         -12-                                          12
