4ASR3d79

Series: 4ASR3d | Year: () | 4ASR3d79
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RICHARD AMES,

Plaintiff,

 

v.

 

DEPARTMENT OF TREASURY, TAX OFFICE, AND

JOYCE STEWART, Tax Director, Defendants.

 

High Court of American

Samoa

Trial Division

 

CA No. 115-99 [4ASR3d79]

 

February 18, 2000

 

 

[1] T.C.R.C.P. 12(a), providing for default judgments,

requires that a defendant serve his answer within 20 days after the service of

the summons and

complaint against him

 

[2] Tardy service alone does

not entitle a defendant to a default judgment since under T.C.R.C.P. 55(e) no

judgment by default shall be entered against the American Samoa Government

unless the claimant establishes his claim or right to relief by evidence to be

scrutinized by the court; default judgments are drastic remedies used only in

extreme situations, as where the adversary process is halted by an unresponsive

party; serving an answer a day late is not such an extreme situation.

 

[3] Under T.C.R.C.P.

12(b)(6), a complaint should not be dismissed for failure to state a claim

unless it appears beyond doubt that the plaintiff can prove no set of facts in

support of his claim which would entitle him to relief; the court assumes the

allegations in the complaint are true, and the burden of proving the absence of

a claim rests on the party seeking dismissal.

 

[4] A.S.C.A. § 11.0408

confers jurisdiction on the High Court with respect to disputes concerning the

American Samoa income tax, and A.S.C.A. § 11.0403 incorporates by reference the

United States Internal Revenue Code, 26 U.S.C. § 1 et seq., for income

taxation in American Samoa.

 

[5] 26 U.S.C. § 7521(b),

which describes procedures involving taxpayer interviews, does not give rise to

a cause of action for a failure to abide by its requirements, and the Court

will not enjoin the tax office from investigations when it appears that a

plaintiff has independently apprised himself of his rights and is exercising

them.

 

[6] The deficiency

procedures referred to in 26 U.S.C. § 6201(d) require that a notice of

deficiency be issued before attempting to assess the same, but such notice is

not required to be given at any specific point in an audit.

 

[7] 26 U.S.C. § 7421(a)—the

Anti-Injunction Act—prohibits suits against the tax office for its actions in

assessing and collecting taxes, and this section does not permit a court to

enjoin a summons.

 

[8] When the tax office

concludes that taxes are owed, it must issue a notice of deficiency under 26

U.S.C. § 6212 as a prerequisite to assessment, and it is at that point that a

challenge to the deficiency can be made by petitioning this Court under 26

U.S.C. § 6213, which [4ASR3d80] provides

for an exception to the general prohibition on suits contained in 26 U.S.C. §

7421(a).

 

[9] In the case of tax

proceedings, Congress deliberately waived sovereign immunity by providing for

deficiency hearings and refund suits; and as an alternative to naming the Tax

Office and the Director of the Tax Office, a plaintiff may name the American

Samoa Government (“ASG”) as a defendant in a suit founded on valid claims.

 

Before KRUSE, Chief Justice,

TUAOLO, Chief Associate Judge, and SAGAPOLUTELE, Associate Judge.

 

Counsel:                For Plaintiff, Pro Se

 For Defendants, Fiti A. Sunia, Assistant

Attorney General

 

ORDER ON DEFENDANT’S MOTION

TO DISMISS AND ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

 

Plaintiff Richard D. Ames (“Ames”) initiated this

action on November 12, 1999 with his filing of a “Motion to Quash and/or

Terminate Summons and Second Re-examination of Tax Returns.” Ames

then subsequently filed an “Amended Complaint” on November 15, 1999, alleging

five causes of action against defendants arising out of the Tax Office’s

alleged improper administration of Ames

tax audit.

 

Facts

 

This dispute arises out of

an audit of Ames

tax returns. After much back and forth between Ames

and the Tax Office, the Tax Office served Ames

with a summons on October 26, 1999, requesting the production of certain

business records.  Ames refused to provide these records,

choosing instead to seek relief from this Court.  Both his original pleading and his amended

complaint, the latter served on November 15, 1999, request that the Court quash

the Tax Office summons, end its audit, and direct the Tax Office to issue

either a letter of understanding or a letter of deficiency based on its

findings to date.  Defendants submitted

their motion to dismiss to the Court on December 6, 1999, and it was filed the

next day. Ames

asserts that he did not receive notice of the motion until December 7,

1999.  Based on the date he received

notice, which was one day after the statutorily permitted 20 days to file and

serve an answer, Ames

filed a motion for default judgment on December 8, 1999.  Plaintiff and defense counsel argued both the

motion to dismiss and the motion for default judgment at a hearing held on

January 24, 2000. [4ASR3d81]

 

 

 

Discussion

 

A.  Motion for Default Judgment

 

[1] Ames bases his motion for default judgment on

the requirements of T.C.R.C.P. 12(a). 

This rule requires that a defendant “serve answer within 20 days after

the service of the summons and complaint against him . . .”  Ames

served a summons and complaint upon the Tax Office on November 15, 1999, and

asserts that he did not receive notice of the answer until approximately 2 p.m.

on December 7, 1999.  Based on these

dates, he argues that the motion was not served within the requisite 20 day

period.  Calculations made according to

T.C.R.C.P. 6(a) support Ames

position and show that defendants did not serve him until 21 days after he

served his complaint.

 

[2] Defendants’ tardy service

does not, however, entitle Ames

to a default judgment.  First, T.C.R.C.P.

55(e) states that “[n]o judgment by default shall be entered against the

American Samoa Government . . . or an officer or agency . . . unless the

claimant established his claim or right to relief by evidence satisfactory to

the court.”  Second, we have held that a

court must scrutinize the evidence before any default judgment may be

entered.  Scalise

v. Gorniak, 26 A.S.R.2d 85, 86 (Trial Div. 1994).  Third, default judgments are drastic remedies

that are to be used only in extreme situations, such as where the adversary

process has been essentially halted by an unresponsive party.  H.F. Livermore Corp. v.

Aktiengeschellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir.

1970).  Serving an answer a day late does

not even approach such an extreme situation. 

The Court will therefore deny Ames

default judgment and address the merits of the complaint.

 

B.  Motion to Dismiss

 

1. T.C.R.C.P. 12(b)(6)

 

Defendants base their motion

to dismiss on T.C.R.C.P. 12(b)(6). This rule directs the court to dismiss

complaints that fail to state a claim upon which relief can be granted.  Defendants assert that Ames has failed to allege claims warranting

relief for two reasons.  First, the

Internal Revenue Code prohibits suits that interfere with the Tax Office’s

ability to assess taxes.  Second, the

Department of Treasury, the Tax Office, and their employees, as agencies of the

government and its employees, cannot be sued because there exists no statutory

authorization permitting suits against them.

 

[3] “The . . . standard with

motions of the type before us [l2(b)(6)] is that a complaint should not be

dismissed for failure to state a claim unless it appears beyond doubt that the

plaintiff can prove no set of facts in [4ASR3d82]

support of his claim which would entitle him to relief.”  Moeisogi v. Faleafine, 5 A.S.R.2d

l3l-134 (Land & Titles Div. 1987) (citing Conley v. Gibson, 355 U.S.

41 (1957)).  In considering a 12(b)(6)

motion, the court assumes the allegations in the complaint are true.  Rogin v. Bensalem Twp., 616 F.2d 680,

685 (9th Cir. 1980).  The burden of

proving the absence of a claim rests on the party seeking dismissal.  Kehr Packages, Inc. v. Fidelcor, Inc., 926

F.2d 1406, 1409 (3d Cir. 1991).  For the

reasons discussed below, defendants have met this burden, and as a result,

their motion to dismiss is granted.

 

2. Ames Has No Valid Claims Under the Tax Code

 

Defendants first argue that Ames has no valid claim

under the tax code. We agree, for reasons laid out in the paragraphs that

follow.

 

[4] A.S.C.A. § 11.0408 confers

jurisdiction on the High Court with respect to disputes concerning the American Samoa income

tax.  Thus, Ames is in the right place to file suit

against the American Samoa Government. 

The territorial legislature has incorporated by reference the United

States Internal Revenue Code, 26 U.S.C. § 1 et seq., for income taxation

in American Samoa.  A.S.C.A. § 11.0403, Klauk v.

Am. Samoa Gov’t, 13 A.S.R.2d 52, 55 (Trial Div. 1989).  The sections of the IRS code under which Ames has asserted claims, namely 26 U.S.C. §§ 6201(d) and

7521(b) (2000), are thus included in the American

Samoa income tax laws.

 

Ames, however, fails to

demonstrate that relief can be granted on these claims.  The sections he cites can serve as a basis

for relief only in certain situations, none of which are applicable in the

current case.

 

[5] Ames bases his first claim on 26 U.S.C. §

7521(b), which describes procedures involving taxpayer interviews.  Ames

asserts that he was never informed of the procedure governing or his rights

under the audit process, as required by this section.  Taking this assertion as true means that Ames was denied protection

under the statutory scheme and gives rise to the possibility of a due process

claim.  However, Ames has not cited, and neither has the Court

found, any instance in which failure to abide by the requirements of § 7521(b)

gave rise to a cause of action.  In the

absence of such precedent this Court will not enjoin the tax office from

investigations when it appears that Ames has independently apprised himself of

his rights and is at this moment exercising them to the fullest extent

possible.

 

[6] Claims two through four are

grounded in 26 U.S.C. § 6201(d), which refers the reader to Subchapter B,

entitled “Deficiency Procedures.”  We are

unable to find any provisions in this subchapter on which Ames could base a claim to quash summons and

prevent investigation.  While [4ASR3d83] § 6212 requires that

defendants issue a notice of deficiency before attempting to assess the same,

it does not require that defendants issue such notice at any specific point in

the audit.  Ames’ claims based on this section, numbers

2, 3, and 4, thus fail to state a claim upon which relief can be based.    

 

Ames’ fifth claim asserts that

defendants’ requests for further information are “clearly in further violation

of the IRS code, due process and audit procedures,” but this is anything but

clear to the Court.  Ames cites no law to support this assertion,

and although the Court is willing to construe pleadings in the favor of those

facing motions to dismiss, and especially so in the case of those defending

themselves without the benefit of counsel, it is not inclined to research and

assert valid claims sua sponte.  Ames’ fifth claim is

simply too vague to resist the motion to dismiss.

 

[7] Even if Ames could assert claims under the sections

cited above, they would be barred by 26 U.S.C. § 7421(a).  This section, commonly known as the

Anti-Injunction Act, prohibits suits against the tax office for its actions in

assessing and collecting taxes.  Alamoana

Recipe Inc. v. Am. Samoa Gov’t,

24 A.S.R.2d 156, 157-58 (Trial Div. 1993). More specifically, courts have held

that this section does not permit a court to enjoin a summons.  See Anderson

v. Internal Revenue Serv., 371 F. Supp. 1278, 1281 (D. Wyo.

1974); Ramos v. United

States, 375 F. Supp. 154, 156 (E.D. Pa.

1974).  The Ninth Circuit has also held

that § 7421(a) prohibits taxpayers from obtaining an injunction compelling the

tax office to grant taxpayers a hearing before permitting an additional

inspection of their books.  Zimmer v.

Connett, 640 F.2d 208, 210 (9th Cir. 1981). 

Finally, courts are agreed that § 421(a) denies suits based on alleged

harassment by tax officials, barring their exceeding statutory authority.  See, e.g., Black v. United States, 534 F.2d 524

(2d Cir. 1976). Ames

request for the Court to quash summons and enjoin the tax office from further

assessment actions are thus precluded by this enactment.

 

[8] Ames’ sole course of action at this point is

to comply with the requests of the tax office. If the office concludes that Ames owes taxes, it must

issue a notice of deficiency under 26 U.S.C. § 6212 as a prerequisite to

assessment.  Klauk, 13 A.S.R.2d at

55, Robinson v. United

States, 920 F.2d 1157, 1158 (3d Cir.

1990).  At that point Ames can challenge the deficiency by

petitioning this Court under 26 U.S.C. § 6213, which provides for an exception

to the general prohibition on suits contained in 26 U.S.C. § 7421(a).  See Laino v. United States, 633 F.2d 626,

630 (2d Cir. 1980).

 

3. Sovereign Immunity

Does Not Bar a Taxpayer Suit Concerning Deficiency or Refund [4ASR3d84]

 

[9] Defendants assert that,

even if Ames

has valid claims under the tax code, they are barred by the doctrine of

sovereign immunity generally enjoyed by ASG agencies.  Defendants are incorrect.  In the case of tax proceedings, Congress

deliberately waived sovereign immunity by providing for deficiency hearings and

refund suits.  Klauk, 13 A.S.R.2d

at 60.  As an alternative to naming the

Tax Office and the Director of the Tax Office, Ames could thus name the American Samoa

Government as a defendant in a suit founded on valid claims.

 

Order

 

For the reasons stated

above, defendants’ motion to dismiss is granted.

 

It is so ordered.

 

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