Kornhauser v. United States of America

Filing 60

ORDER by Judge Haywood S. Gilliam, Jr. DENYING PLAINTIFF'S AND DEFENDANT'S ( 35 , 37 ) CROSS MOTIONS FOR SUMMARY JUDGMENT. (ndrS, COURT STAFF) (Filed on 2/19/2016)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7

SAMUEL KORNHAUSER,

Case No. 14-cv-05610-HSG

Plaintiff,
8

ORDER DENYING PLAINTIFF'S AND
DEFENDANT'S CROSS MOTIONS FOR
SUMMARY JUDGMENT

v.
9
10

UNITED STATES OF AMERICA,

Re: Dkt. Nos. 35, 37

Defendant.

United States District Court
Northern District of California

11
12
Plaintiff Samuel Kornhauser filed the current action against Defendant the United States of

13
14

America to recover an alleged overpayment of his 1998 federal tax liability. Plaintiff and

15

Defendant filed cross-motions for summary judgment. Dkt. Nos. 35, 37. For the reasons

16

articulated below, and as ordered at the hearing on February 11, 2016, the Court hereby DENIES

17

both motions for summary judgment.

18

I.

BACKGROUND

19

The following facts are not genuinely in dispute.

20

In 1998, Plaintiff’s federal tax liability was $174,764. See Dkt. No. 47, Ex. 2 (“Form

21

4340”) at 2. Official Internal Revenue Service (“IRS”) records contain no evidence of Plaintiff

22

filing a 1998 income tax return prior to 2007 or making payments towards his 1998 income tax

23

liability prior to 2009. Id.; Dkt. No. 38-3, Ex. 6; Dkt. No. 46, Petrovic Decl., ¶ 7.

24

On September 7, 2009, the IRS assessed Plaintiff $174,764 for his 1998 federal income tax

25

liability. Dkt. No. 46, Petrovic Decl., ¶ 8. In response to repeated notices from the IRS, Plaintiff

26

paid the IRS assessment of $174,764 in January of 2013. See Dkt. No. 36, Ex. 4 at 46-47; Dkt.

27

No. 38-1, Ex. 2 at 4. On June 26, 2013, Plaintiff claimed a tax refund of $174,764 because he

28

believed that he had paid his 1998 federal tax liability twice — once in July of 2000 and again in

1

January 2013. See Dkt. No. 36, Ex. 4 at 44-45. The IRS denied the claim.

2

As of July 2000, upon acceptance of a hand-delivered federal tax return, the IRS’s

3

procedure was to stamp the return with a “Received Date Stamp” and to provide the taxpayer with

4

either (1) a stamped copied of the tax return if the taxpayer had brought an extra copy or (2) a

5

photocopy of the front page of the return reflecting the “Received Date Stamp.” See Dkt. No. 46,

6

Holness Decl., ¶ 5. If a taxpayer hand-delivered his federal income tax payment with his tax

7

return, the IRS would also provide a photocopy of the check. Id. ¶ 7.
Although Plaintiff contends that he filed and paid his 1998 federal taxes in-person on July

8
9

21, 2000, Plaintiff has neither a stamped copy of his tax return nor a photocopy of the stamped
first page of his tax return. Dkt. No. 40, Ex. 7 at 19:5-16. Nor does Plaintiff possess a photocopy

11
United States District Court
Northern District of California

10

of the check allegedly used to pay his 1998 federal taxes, or other documentary evidence that such

12

a check was issued. See id. at 25:2-21, 28:11-18.
Also in July 2000, the California Franchise Tax Board required a taxpayer filing his 1998

13
14

state tax return to attach a copy of his federal tax return. See Dkt. No. 36, Ex. 3 at 20:2-5. On July

15

21, 2000, the California Franchise Tax Board received Plaintiff’s 1998 state tax return and

16

associated payment, along with an unstamped copy of his 1998 federal tax return. See Dkt. No.

17

36, Exs. 2, 11 at 22:18-23:2.
There are no third-party witnesses who corroborate Plaintiff’s testimony that he filed and

18
19
20
21

paid his 1998 federal taxes on July 21, 2000. See Dkt. No. 49, Ex. 7 at 18:6-10.
II.

LEGAL STANDARD
Summary judgment is proper where the pleadings and evidence demonstrate “there is no

22

genuine issue as to any material fact and . . . the movant is entitled to judgment as a matter of

23

law.” Fed. R. Civ. P. 56(c)(2); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material

24

issue of fact is a question a trier of fact must answer to determine the rights of the parties under the

25

applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute

26

is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving

27

party.” Id.

28

The moving party bears “the initial responsibility of informing the district court of the
2

1

basis for its motion.” Celotex, 477 U.S. at 323. To satisfy this burden, the moving party must

2

demonstrate that no genuine issue of material fact exists for trial. Id. at 322. To survive a motion

3

for summary judgment, the non-moving party must then show that there are genuine factual issues

4

that can only be resolved by the trier of fact. Reese v. Jefferson Sch. Dist., No. 14J, 208 F.3d 736,

5

738 (9th Cir. 2000). To do so, the non-moving party must present specific facts creating a genuine

6

issue of material fact. Fed. R. Civ. P. 56(c); Celotex, 477 U.S. at 324. “A conclusory, self-serving

7

affidavit, lacking detailed facts and any supporting evidence, is insufficient to create a genuine

8

issue of material fact.” F.T.C. v. Publ’g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir.

9

1997), as amended (Apr. 11, 1997).

10

The court must review the record as a whole and draw all reasonable inferences in favor of

United States District Court
Northern District of California

11

the non-moving party. Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1112 (9th Cir. 2003).

12

However, unsupported conjecture or conclusory statements are insufficient to defeat summary

13

judgment. Id. Moreover, the court is not required “to scour the record in search of a genuine issue

14

of triable fact,” Keenan v. Allen, 91 F.3d 1275, 1279 (9th Cir. 1996) (citations omitted), but rather

15

may limit its review to the documents submitted for purposes of summary judgment and those

16

parts of the record specifically referenced therein.” Carmen v. San Francisco Unified Sch. Dist.,

17

237 F.3d 1026, 1030 (9th Cir. 2001).

18

A.

19

The Parties move for summary judgment with regard to two issues: (1) whether Plaintiff

Discussion

20

filed his 1998 federal tax return on or around July 21, 2000 and (2) whether Plaintiff paid his 1998

21

federal tax liability on or around July 21, 2000. Plaintiff also moves for summary judgment as to

22

(3) whether the IRS’s notice of deficiency and tax assessment is barred by the three-year statute of

23

limitations under 26 U.S.C. § 6501 and (4) whether the IRS is equitably estopped from assessing

24

Plaintiff’s 1998 tax liability because of evidence spoliation.

25
26

i.

Plaintiff’s Motion for Summary Judgment
a. Whether Plaintiff Filed 1998 Return and Made His Payment in 2000

27

The crux of Plaintiff’s motion is that “there is no admissible evidence from the IRS records

28

to refute that [Plaintiff] delivered his 1998 tax return and . . . tax payment . . . to the San Francisco
3

1
2

IRS officer on July 21, 2000.” See Dkt. No. 35, Pl.’s Mot. for Summ. J. (“Pl. MSJ”), at 8.
Plaintiff is incorrect. Defendant has submitted Plaintiff’s form 4340, which shows no

3

record of Plaintiff filing his 1998 federal tax return prior to 2007 or making payments towards his

4

1998 income tax liability prior to 2009. See Form 4340 at 2; Dkt. No. 38-3, Ex. 6; Dkt. No. 46,

5

Petrovic Decl., ¶ 7. Certificates of Assessments and Payments, such as forms 4340, are “probative

6

evidence in and of themselves and, in the absence of contrary evidence, are sufficient to establish

7

that . . . assessments were properly made.” Koff v. United States, 3 F.3d 1297, 1298 (9th Cir.

8

1993). Moreover, Certificates of Assessments and Payments are admissible in evidence as public

9

records. Hughes v. United States, 953 F.2d 531, 539 (9th Cir. 1992).

10

Accordingly, the Court may consider Plaintiff’s form 4340, and the IRS has proffered

United States District Court
Northern District of California

11

sufficient evidence to raise a genuine dispute as to whether Plaintiff filed and paid his 1998 federal

12

taxes on or around July 21, 2000.

13
14
15
16

b. Statute of Limitations
Plaintiff also contends that the IRS’s tax assessment is barred by the three-year statute of
limitations under 26 U.S.C. § 6501(a). See Pl. MSJ at 11-12.
26 U.S.C. § 6501(a) reads: “[T]he amount of any tax imposed by this title shall be assessed

17

within 3 years after the return was filed.” 26 U.S.C. § 6501(a) (emphasis added). However, 26

18

U.S.C. § 6501(c)(3) provides that “[i]n the case of failure to file a return, the tax may be

19

assessed . . . at any time.” 26 U.S.C. § 6501(c)(3) (emphasis added).

20

Here, the applicable subsection of 26 U.S.C. § 6501 hinges on whether Plaintiff filed his

21

1998 federal tax return on or about July 21, 2000. See 26 U.S.C. § 6501(a); 26 U.S.C.

22

§ 6501(c)(3). As stated above, the Court has found that there is a genuine dispute of material fact

23

as to whether, and when, Plaintiff filed his 1998 federal tax return, and thus, the Court cannot

24

resolve the statute of limitations issue at this stage.

25

c. Equitable Estoppel Due to Spoliation of Evidence

26

Finally, Plaintiff asserts that the IRS should be equitably estopped from its tax assessment

27

because it engaged in spoliation of evidence. See Pl. MSJ at 9-11. The IRS strongly contests any

28

allegation of affirmative misconduct. Dkt. No. 45 at 15-19; Dkt. No. 46, Doolittle Decl., ¶¶ 5, 7.
4

1

Equitable estoppel requires: “(1) knowledge of the true facts by the party to be estopped;

2

(2) intent to induce reliance or actions giving rise to a belief in that intent; (3) ignorance of the true

3

facts by the relying party; and (4) detrimental reliance.” Bolt v. United States, 944 F.2d 603, 609

4

(9th Cir. 1991). “[F]or the government to be estopped there must be affirmative misconduct (not

5

mere negligence) and a serious injustice outweighing the damage to the public interest of

6

estopping the government.” Id.

7
8
9
10

This fact-intensive issue also is not appropriate for summary judgment, and the Court
accordingly DENIES Plaintiff’s motion for summary judgment.
ii.

Defendant’s Motion for Summary Judgment

Defendant’s motion for summary judgment turns on its argument that Plaintiff’s

United States District Court
Northern District of California

11

uncorroborated, “self-serving” testimony as to when he filed and paid his 1998 federal taxes

12

cannot overcome the presumption of correctness given to IRS deficiency determinations. See Dkt.

13

No. 37, Def.’s Mot. for Summ. J., at 5-6.

14

However, the presumption of correctness given to IRS deficiency determinations is just

15

that — a presumption that can be overcome with sufficient evidence at trial, not a final

16

determination of the merits. Furthermore, that Plaintiff’s declarations and testimony are self-

17

serving is of no consequence. “[D]eclarations are often self-serving, and this is properly so

18

because the party submitting it would use the declaration to support his or her position.” Nigro v.

19

Sears, Roebuck & Co., 784 F.3d 495, 497 (9th Cir. 2015). The self-serving nature of Plaintiff’s

20

evidence may bear on its credibility and weight at trial, but a “district court may not disregard a

21

piece of evidence at the summary judgment stage solely based on its self-serving nature.” Id.

22

Plaintiff’s testimony contains sufficient facts about the filing and payment of his 1998

23

taxes such that it cannot be categorized as unsupported conjecture or conclusory. See, e.g., Dkt.

24

No. 36, Exhibit 10; see also Hernandez v. Spacelabs Med. Inc., 343 F.3d at 1112. Moreover,

25

Plaintiff’s 1998 California state tax return received on July 21, 2000, with the attached copy of his

26

completed federal tax return has been recognized as “strong circumstantial evidence” as to when

27

he completed and filed his federal tax return. See Lewis v. United States, 144 F.3d 1220, 1223

28

(9th Cir. 1998); see Dkt. No. 36, Exs. 2, 11 at 22:18-23:2. Plaintiff has submitted sufficient
5

1

evidence to create a genuine dispute of material fact as to when he filed and paid his 1998 federal

2

taxes.
Accordingly, the Court DENIES Defendant’s motion for summary judgment.

3
4
5

III.

CONCLUSION
For the above reasons, Plaintiff’s and Defendant’s cross motions for summary judgment

6

are DENIED. A jury’s resolution of the issues in this case will hinge almost entirely on their

7

assessment of witness credibility. Having not seen any witness testify live, the Court has no basis

8

for evaluating such credibility at this point, and will simply point out the obvious: a trial in a case

9

this heavily reliant on the jury’s basic credibility assessments will involve substantial uncertainty

10

United States District Court
Northern District of California

11

and entail significant litigation risk for both sides.
The Parties shall engage in the previously ordered settlement conference as directed by

12

Magistrate Judge James. See Dkt. No. 56. All other dates, including the April 12, 2016 pretrial

13

conference and the May 2, 2016 trial date remain in effect.

14
15
16
17

IT IS SO ORDERED.
Dated: 2/19/2016
______________________________________
HAYWOOD S. GILLIAM, JR.
United States District Judge

18
19
20
21
22
23
24
25
26
27
28
6