                                           THOMAS EDWARD SETTLES, PETITIONER v. COMMISSIONER                                           OF
                                                     INTERNAL REVENUE, RESPONDENT
                                                 Docket Nos. 13224–09L, 13225–09L.                         Filed May 8, 2012.

                                                    After P filed his petitions in this Court seeking review of R’s
                                                 collection actions pursuant to I.R.C. sec. 6330(d), he filed a
                                                 petition in bankruptcy court. The proceedings in this Court
                                                 were automatically stayed pursuant to 11 U.S.C. sec. 362(a)(8)
                                                 (2006). In an adversary proceeding pursuant to 11 U.S.C. sec.
                                                 505(a), the bankruptcy court decided P’s underlying tax liabil-
                                                 ities. While the bankruptcy proceeding was still pending and
                                                 without having first received any order of the bankruptcy
                                                 court vacating or lifting the stay, P filed motions to dismiss
                                                 in the instant cases. Held: The automatic stay pursuant to 11
                                                 U.S.C. sec. 362(a)(8) does not prevent the granting of P’s
                                                 motions to dismiss the petitions for review of collection
                                                 actions filed pursuant to I.R.C. sec. 6330(d) in this Court.

                                            Thomas Edward Settles, pro se.
                                            Shawna A. Early, for respondent.


                                      372




VerDate 0ct 09 2002   10:59 Jun 06, 2013    Jkt 372897   PO 20009   Frm 00001   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
                                      (372)                         SETTLES v. COMMISSIONER                                           373


                                                                                  OPINION

                                         WELLS, Judge: These cases are before the Court on peti-
                                      tioner’s motions to dismiss. The sole issue we must decide is
                                      whether the dismissal of petitioner’s cases would violate the
                                      automatic stay that arises, pursuant to 11 U.S.C. sec.
                                      362(a)(8) (2006), when a bankruptcy petition is filed that has
                                      not been vacated or lifted and the bankruptcy proceedings
                                      are still pending.

                                                                                Background
                                         On June 1, 2009, petitioner filed petitions in this Court in
                                      the cases docketed at Nos. 13224–09L and 13225–09L, chal-
                                      lenging, among other things, his underlying Federal income
                                      tax liabilities for his 1998, 1999, 2000, 2001, and 2002 tax
                                      years. At the time he filed his petitions, he was a resident
                                      of Tennessee. On September 25, 2009, petitioner filed a
                                      chapter 11 bankruptcy petition with the U.S. Bankruptcy
                                      Court for the Eastern District of Tennessee (bankruptcy
                                      court). On October 22, 2009, respondent filed with this Court
                                      notices of proceeding in bankruptcy, and on October 29, 2009,
                                      this Court issued an order in each of the instant cases that,
                                      pursuant to 11 U.S.C. sec. 362(a)(8), the proceedings in this
                                      Court were automatically stayed.
                                         On April 9, 2010, petitioner filed in the bankruptcy court
                                      an adversary proceeding against respondent pursuant to 11
                                      U.S.C. sec. 505(a), seeking declaratory judgment as to the
                                      existence and/or correctness of respondent’s proof of claim for
                                      outstanding income tax liabilities that had been filed in the
                                      bankruptcy court and were the same underlying liabilities in
                                      issue in the instant cases. On June 10, 2011, the bankruptcy
                                      court granted respondent’s motion for summary judgment
                                      and ruled that petitioner was estopped from challenging the
                                      amounts of the outstanding tax liabilities respondent
                                      asserted in his proof of claim in the bankruptcy court. The
                                      bankruptcy proceedings are still pending, and the stay under
                                      11 U.S.C. sec. 362(a)(8) has not been vacated or lifted.
                                         Consequently, on July 11, 2011, petitioner submitted to the
                                      Court and to respondent motions to dismiss as moot the peti-
                                      tions in the instant cases. On September 15, 2011, the Court
                                      filed petitioner’s motions in the instant cases. Respondent
                                      has no objection to the granting of petitioner’s motions.




VerDate 0ct 09 2002   10:59 Jun 06, 2013   Jkt 372897   PO 20009   Frm 00002   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
                                      374                 138 UNITED STATES TAX COURT REPORTS                                         (372)


                                                                                 Discussion
                                         Although other courts have addressed issues similar to the
                                      question before us, this is the first occasion the Tax Court
                                      has had to address the issue of whether we may dismiss a
                                      case that has been stayed under the automatic stay provision
                                      of 11 U.S.C. sec. 362(a)(8) before the stay has been vacated
                                      or lifted by the bankruptcy court having jurisdiction over the
                                      matter.
                                         As a preliminary matter, we consider whether the Tax
                                      Court, even in the absence of the 11 U.S.C. sec. 362(a)(8)
                                      automatic stay, can grant petitioner’s motions to dismiss the
                                      instant cases. In the deficiency context, once a taxpayer has
                                      filed a petition with the Tax Court, the taxpayer cannot with-
                                      draw that petition. See Estate of Ming v. Commissioner, 62
                                      T.C. 519 (1974). When the Tax Court dismisses a deficiency
                                      case for a reason other than lack of jurisdiction, we generally
                                      are required by section 7459(d) 1 to enter a decision for the
                                      Commissioner for the amount of tax determined against the
                                      taxpayer in the notice of deficiency. Id. at 522. Rule 123(d)
                                      requires that a decision entered pursuant to a dismissal on
                                      a ground other than lack of jurisdiction operate as an adju-
                                      dication on the merits of the taxpayer’s case.
                                         However, in the instant cases, petitioner petitioned the
                                      Court to review a collection action under section 6330(d), not
                                      to redetermine a deficiency under section 6213(a). In contrast
                                      to the deficiency context, a taxpayer who files a petition
                                      asking the Tax Court to review a collection action does have
                                      the option to withdraw that petition. Wagner v. Commis-
                                      sioner, 118 T.C. 330, 332–334 (2002). In Wagner v.
                                      Commissioner, 118 T.C. at 332, we distinguished petitions in
                                      collection cases from those in deficiency cases because section
                                      7459(d) applies only to a petition that is filed for redeter-
                                      mination of a deficiency and makes no mention of a petition
                                      filed to review a collection action. In deciding that the tax-
                                      payers could withdraw their petition in Wagner, we consid-
                                      ered the Federal Rules of Civil Procedure, which we may con-
                                      sult when our Rules do not contain an applicable Rule. Id.
                                      at 332–333; see Rule 1(b). 2 Rule 41(a)(2) of the Federal Rules
                                       1 Unless otherwise indicated, section references are to the Internal Revenue Code of 1986, as

                                      amended, and Rule references are to the Tax Court Rules of Practice and Procedure.
                                       2 In Wagner v. Commissioner, 118 T.C. 330, 333 n.6 (2002), we stated that Rule 123(b), relat-




VerDate 0ct 09 2002   10:59 Jun 06, 2013   Jkt 372897   PO 20009   Frm 00003   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
                                      (372)                         SETTLES v. COMMISSIONER                                           375


                                      of Civil Procedure permits a court to dismiss an action at the
                                      plaintiff ’s request ‘‘on terms that the court considers proper.’’
                                      The purpose of rule 41(a)(2) of the Federal Rules of Civil
                                      Procedure, which requires court approval of a voluntary dis-
                                      missal, is to protect the nonmovant from unfair treatment.
                                      Bridgeport Music, Inc. v. Universal-MCA Music Pub., Inc.,
                                      583 F.3d 948, 953 (6th Cir. 2009); Grover by Grover v. Eli
                                      Lilly & Co., 33 F.3d 716, 718 (6th Cir. 1994). Unless the
                                      court orders otherwise, the granting of a motion to dismiss
                                      pursuant to rule 41(a)(2) of the Federal Rules of Civil Proce-
                                      dure is without prejudice. 3
                                         As noted above, respondent has no objection to the dis-
                                      missal of petitioner’s cases. We conclude that, consistent with
                                      Wagner, we may dismiss petitioner’s cases pursuant to rule
                                      41(a)(2) of the Federal Rules of Civil Procedure. However, we
                                      next consider whether we may grant a motion to voluntarily
                                      dismiss where an automatic stay pursuant to 11 U.S.C. sec.
                                      362(a)(8) is pending and has not been vacated.
                                         Pursuant to 11 U.S.C. sec. 362(a)(8), a bankruptcy petition
                                      ‘‘operates as a stay, applicable to all entities, of * * * the
                                      commencement or continuation of a proceeding before the
                                      United States Tax Court concerning a tax liability of a
                                      debtor’’. The term ‘‘entity’’ is defined to include ‘‘person,
                                      estate, trust, governmental unit, and United States trustee’’.
                                      11 U.S.C. sec. 101(15).
                                         Petitioner contends that the dismissal of the instant cases
                                      would not violate the automatic stay under 11 U.S.C. sec.
                                      362(a)(8) because 11 U.S.C. sec. 362(a)(8) stays the
                                      commencement or continuation of an action, but not its dis-
                                      missal. We are guided by the decisions of a number of other
                                      courts that have considered whether the dismissal of a case
                                      against a debtor violates the automatic stay pursuant to 11
                                      U.S.C. sec. 362(a)(1). 4
                                      ing to dismissals, does not apply where the taxpayers ‘‘voluntarily move the Court to dismiss
                                      their petition filed under sec. 6320(c) to review a notice of Federal tax lien.’’
                                         3 We note, however, that the statutory period during which petitioner could refile a petition

                                      in this Court has expired pursuant to sec. 6330(d)(1).
                                         4 By its terms, 11 U.S.C. sec. 362(a)(1) (2006) acts to stay actions or proceedings against the

                                      debtor. In contrast, 11 U.S.C. sec. 362(a)(8) acts to stay the ‘‘commencement or continuation of
                                      a proceeding before the United States Tax Court’’. The stay pursuant to 11 U.S.C. sec. 362(a)(8)
                                      is different from that pursuant to 11 U.S.C. sec. 362(a)(1) in that it acts to stay actions brought
                                      by the debtor. However, the provisions are similar in that they act to stay proceedings related
                                      to disputes regarding debts owed by the debtor. Accordingly, as we explain below, we consider
                                      the decisions of other courts concerning the purpose of the stay pursuant to 11 U.S.C. sec.
                                                                                                      Continued




VerDate 0ct 09 2002   10:59 Jun 06, 2013   Jkt 372897   PO 20009   Frm 00004   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
                                      376                 138 UNITED STATES TAX COURT REPORTS                                         (372)


                                         In general, courts have held that 11 U.S.C. sec. 362(a)(1)
                                      does not prevent courts from dismissing cases against
                                      debtors for failures to comply with court rules or to prosecute
                                      pursuant to rule 41(b) of the Federal Rules of Civil Proce-
                                      dure. See O’Donnell v. Vencor, Inc., 466 F.3d 1104 (9th Cir.
                                      2006); Dennis v. A.H. Robins Co., 860 F.2d 871 (8th Cir.
                                      1988). Similarly, courts have held that the automatic stay
                                      does not prevent a court from dismissing a case against the
                                      debtor on the motion of the plaintiff pursuant to rule 41(a)
                                      of the Federal Rules of Civil Procedure. See Arnold v.
                                      Garlock Inc., 288 F.3d 234 (5th Cir. 2002); Slay v. Living
                                      Ctrs. E., Inc., 249 B.R. 807 (S.D. Ala. 2000); Chase Manhat-
                                      tan Bank, N.A. v. Celotex Corp., 852 F. Supp. 226 (S.D.N.Y.
                                      1994). In contrast, courts have held that, where an order of
                                      dismissal against the debtor would require the court to con-
                                      sider issues related to the underlying case, the dismissal
                                      would constitute a continuation of the judicial proceeding
                                      and is therefore barred by the automatic stay. See Dean v.
                                      Trans World Airlines, Inc., 72 F.3d 754 (9th Cir. 1995); cf.
                                      Pope v. Manville Forest Prods. Corp., 778 F.2d 238 (5th Cir.
                                      1985).
                                         In deciding whether dismissal of a particular case violates
                                      11 U.S.C. sec. 362(a)(1), courts have looked to the purpose of
                                      the automatic stay. See Dean v. Trans World Airlines, Inc.,
                                      72 F.3d 754; Indep. Union of Flight Attendants v. Pan Am.
                                      World Airways, Inc., 966 F.2d 457, 459 (9th Cir. 1992). The
                                      purpose of 11 U.S.C. sec. 362(a) is twofold: (1) it protects
                                      debtors by giving them breathing room, stopping collection
                                      efforts and giving them the opportunity to attempt a repay-
                                      ment or reorganization plan; and (2) it protects creditors
                                      because otherwise ‘‘ ‘certain creditors would be able to pursue
                                      their own remedies against the debtor’s property. Those who
                                      acted first would obtain payment of the claims in preference
                                      to and to the detriment of other creditors.’ ’’ Indep. Union of
                                      Flight Attendants, 966 F.2d at 459 (quoting H.R. Rept. No.
                                      95–595, at 340 (1977), 1978 U.S.C.C.A.N. 5963, 6297).
                                         As with the automatic stay pursuant to 11 U.S.C. sec.
                                      362(a)(1), the provisions of paragraph (8) making it
                                      applicable to proceedings in the Tax Court applies, by its
                                      362(a)(1) to be instructive for considering whether the stay pursuant to 11 U.S.C. sec. 362(a)(8)
                                      acts to bar petitioner’s voluntary dismissal of the instant cases.




VerDate 0ct 09 2002   10:59 Jun 06, 2013   Jkt 372897   PO 20009   Frm 00005   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
                                      (372)                            SETTLES v. COMMISSIONER                                          377


                                      terms, only to the ‘‘commencement or continuation’’ of pro-
                                      ceedings and not to their dismissal. As we explained in
                                      Halpern v. Commissioner, 96 T.C. 895, 902 (1991), in addi-
                                      tion to those purposes of 11 U.S.C. sec. 362(a) articulated
                                      above, the purpose of enacting 11 U.S.C. sec. 362(a)(8) was
                                      to ‘‘clarify that this Court would no longer exercise wholly
                                      concurrent jurisdiction with the bankruptcy court with
                                      respect to the resolution of tax issues.’’
                                         Dismissing petitioner’s cases does not require that we con-
                                      sider any issues related to the underlying cases. Con-
                                      sequently, consistent with the analysis of other courts, 5 a
                                      dismissal of the instant cases would not constitute a continu-
                                      ation of the judicial proceedings. See Dean, 72 F.3d at 756.
                                         Additionally, granting petitioner’s motions to dismiss the
                                      instant cases is entirely consistent with the purposes of 11
                                      U.S.C. sec. 362(a)(8). Because the bankruptcy court has
                                      already adjudicated petitioner’s tax liabilities, the goal of
                                      judicial economy has been satisfied. Indeed, that goal will be
                                      furthered by prompt dismissal of the instant cases rather
                                      than by permitting them to languish on our docket until
                                      after the bankruptcy court resolves the remainder of peti-
                                      tioner’s disputes with respect to his creditors. Similarly, the
                                      dismissal of petitioner’s cases is not inconsistent with the
                                      dual purpose of protecting the debtor from harassment by
                                      creditors and protecting creditors from other creditors.
                                         Accordingly, we hold that 11 U.S.C. sec. 362(a)(8) does not
                                      prevent the dismissal of the instant cases on motions of peti-
                                      tioner.




                                           5 For   instance, the Court of Appeals for the Ninth Circuit reasoned as follows:
                                      [T]o permit post-filing dismissal based on resolution of issues presented by or related to an un-
                                      derlying case would require us to impose an unworkable rule to avoid undermining the debtor
                                      protection purpose of the automatic stay. Before a court decides a question, the court does not
                                      know which side will win. Therefore, while a court actively considers an issue in a case against
                                      a debtor, the court cannot know whether its consideration will, in the end, help or harm the
                                      debtor. * * * A rule permitting post-filing dismissal based on a determination of issues pre-
                                      sented by or related to an underlying case is unworkable because, in practice, it would require
                                      courts to know the answers to questions before deciding them. As we were reminded by Lewis
                                      Carroll, first the trial, then the verdict. Such a holding should surprise no one. [Dean v. Trans
                                      World Airlines, Inc., 72 F.3d 754, 756 (9th Cir. 1995).]




VerDate 0ct 09 2002   10:59 Jun 06, 2013    Jkt 372897    PO 20009   Frm 00006   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
                                      378                 138 UNITED STATES TAX COURT REPORTS                                         (372)


                                           To reflect the foregoing,
                                                                     Appropriate orders of dismissal will be
                                                                   entered.

                                                                               f




VerDate 0ct 09 2002   10:59 Jun 06, 2013   Jkt 372897   PO 20009   Frm 00007   Fmt 2847   Sfmt 2847   V:\FILES\SETTLES.138   SHEILA
