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Stiles Corp. v. Internal Revenue Service

United States District Court, S.D. Florida
Nov 8, 2000
Case No. 00-6484-CIV-GOLD/SIMONTON (S.D. Fla. Nov. 8, 2000)

Opinion

Case No. 00-6484-CIV-GOLD/SIMONTON

November 8, 2000

Mark Stier, Esq., Trial Attorney, Tax Division, U.S. Dept. of Justice, Washington, D.C.

Melinda S. Gentile, Esq., Peckar Abramson, Miami, FL.


ORDER DENYING DEFENDANT'S MOTION TO DISMISS


THIS CAUSE is before the court upon Defendant's Motion to Dismiss [D.E. 7], filed on June 14, 2000. Plaintiff filed a Response [D.E. 8], and Defendant filed a Reply [D.E. 9]. Defendant seeks to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(6), failure to state a claim upon which relief can be granted, and Fed.R.Civ.P. 12(b)(7), failure to join a party under Rule 19.

The Complaint, filed on April 5, 2000, alleges a cause of action for wrongful levy under 26 U.S.C. § 7426. Jurisdiction of this court is invoked pursuant to 28 U.S.C. § 1331, federal question jurisdiction. Having carefully considered the arguments of the parties, the applicable case law, and the record as a whole, the court finds that the motion to dismiss should be denied.

I. Factual and Procedural Background

The facts, taken in the light most favorable to the Plaintiff and accepted as true for purposes of this Order only, reveal the following.

Plaintiff Stiles Corporation ("Stiles") is a construction company located in Fort Lauderdale, Florida. In early April 1998, Stiles entered into a Construction Contract (the "Prime Contract") with Sawgrass Plaza Ltd. to construct a building on property in Sunrise, Florida (the "Sawgrass Plaza Project"). On or about April 17, 1998, Stiles entered into a subcontract agreement (the "Subcontract") with Certified Machine Welding, Inc. ("Certified") to do work on the Sawgrass Plaza Contract.

Certified purchased materials and supplies for the Sawgrass Plaza Project in furtherance of its obligations to perform under the Subcontract from Parts Distributors Inc. ("Parts"). Parts, in turn, contracted with Vulcraft Sales Corp. ("Vulcraft") to provide certain materials and supplies to the job, including joists, girders, and deck. Vulcraft served its Notice to Owner on Stiles on or about April 3, 1998, indicating to Stiles that Vulcraft intended to provide supplies to the Sawgrass Plaza Project.

Certified performed work on the Sawgrass Plaza Project in the summer of 1998 and submitted to Stiles a requisition in the amount of $203,844.60 for work performed from June 10, 1998 through July 10, 1998. Included in the amount requisitioned by Certified was $87,937.00 for the cost of materials and supplies provided by Vulcraft to the Sawgrass Plaza Project.

On or about July 23, 1998, Stiles paid Certified the amount of $203,844.60. However, Certified failed to pay Parts and, in turn, Parts failed to pay Vulcraft the $87,937 due Vulcraft for the materials and supplies provided for the Sawgrass Plaza Project.

Stiles learned shortly after its payment to Certified that Vulcraft had not received payment of the monies it was owed. Stiles immediately declared Certified in breach of the Subcontract and proceeded to withhold any additional monies which may be owed to Certified both on the Sawgrass Plaza Project as well as a separate project in Palm Beach County. The total amount of the money Stiles withheld under both projects is $42,497.95 (the "Fund") ($17,569.52 from the Sawgrass Plaza Project and $24,928.43 from the project in Palm Beach County).

Vulcraft proceeded to record a mechanics lien against the Sawgrass Plaza Project on September 11, 1998 and thereafter filed suit against Stiles in Broward County State Circuit Court (the "State Court Action"). Certified has not filed any claim for monies allegedly due and owing to it by Stiles in the State Court Action, and has not filed any other separate action against Stiles alleging that Stiles owes it any monies.

The State Court Action was filed against three defendants, Stiles Corporation, Amwest Surety Insurance Company, and Parts Distributors, Inc. The State Court Complaint alleges that Certified and Parts are affiliated companies that act for and on behalf of each other with respect to the performance of contractual duties and obligations, and that each does business on behalf of the other from time to time. Amwest wrote the surety bond to which Vulcraft's mechanics lien was transferred.

In July of 1999, Stiles, Vulcraft, and Certified entered into a stipulated agreement whereby the Fund could be paid to Vulcraft (the "Stipulation"). By August 9, 1999, the Stipulation was signed by all the parties and was submitted to the Broward County Circuit Court for filing. On August 10, 1999, the IRS issued its Notice of Levy to Stiles, which Stiles received on August 11, 1999, for employment taxes owed by Certified. Prior to its service of the Notice of Levy, the IRS had filed Notices of Federal Tax Liens with respect to Certified on September 28, 1998 and October 1, 1999.

II. Standard of Review

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that dismissal of a claim is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. Alabama, 30 F.3d 117, 120 (11th Cir. 1994) ( quoting Hishon v. King Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232 (1984)). On a motion to dismiss, the Court must accept as true all facts alleged and draw all inferences therefrom in the light most favorable to the non-moving party. See Hunnings v. Texaco, Inc., 29 F.3d 1480, 1483 (11th Cir. 1994). Rule 12(b)(6) is not designed to strike inartistic pleadings or to provide a more definite statement to answer an apparent ambiguity, and the analysis of a 12(b)(6) motion is limited primarily to the face of the complaint and the attachments thereto. Brooks v. Blue Cross and Blue Shield of Fla., Inc., 116 F.3d 1364, 1368 (11th Cir. 1997). Moreover, a complaint should not be dismissed for failure to state a claim upon which relief can be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." M/V Sea Lion V v. Reves, 23 F.3d 345, 347 (11th Cir. 1994) (citation omitted).

III. Discussion

A. Ability to State a Claim Upon Which Relief Can Be Granted 26 U.S.C. § 7426 states that, with regard to property that has been levied upon or sold pursuant to a levy, "any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States." 26 U.S.C. § 7426 (a)(1). "To have standing to challenge a wrongful levy under § 7426, one must have an interest, such as a fee simple or equivalent interest, a possessory interest, or a security interest, in the property levied upon, or a lien on the property at issue; an unsecured interest is not sufficient to confer standing." McGiness v. United States, 90 F.3d 143, 146 (6th Cir. 1996). Only persons claiming specific, possessory rights are entitled to seek judicial review. Lawyers Title Ins. Co. v. Phillips, 108 F. Supp.2d 1382, 1385 (M.D. Ga. 2000) (quoting Valley Finance, Inc. v. United States, 629 F.2d 162, 168 (D.C. Cir. 1980)).

The Defendant has admitted that Plaintiff alleged in paragraph 27 of the Complaint that it has an interest in the subject funds. Indeed, paragraph 27 states that, "Stiles has an interest in the Fund by virtue of the breach of the Contract by Certified and by virtue of the Stipulation in the State Court Action." However, Defendant argues that Stiles' allegation of having an interest in the subject funds is fatally contradicted by Exhibit C to the Complaint, the Stipulation, in which it is stated that the subject funds are owed to the taxpayer. Defendant contends that this admission precludes Stiles from stating a claim upon which relief can be granted.

The August 9, 1999 Stipulation, signed by Vulcraft's attorney, Stiles and Amwest's attorney, the President of Parts, and the General Manager of Certified, states in paragraphs 1 and 2 that the subject funds are "due and owing to Certified under a subcontract agreement." Then, paragraph 7 of the Stipulation states that "Certified and Parts agree that they have no claim against Stiles for its holding of such monies and hereby consent to Stiles' direct payment of such monies to Vulcraft." In paragraph 8, Vulcraft agrees to credit the money as a setoff against the principal amount of its claim in the State Court Action.

The Court finds that, at this point in the case, the language of the Stipulation filed in the State Court Action and attached to the Complaint is not determinative of the interest issue and does not show beyond doubt that the Plaintiff can prove no set of facts that would support its claim for relief. Although in artfully drafted, the language of the Stipulation does not preclude the possibility that it was only referring to Certified's claims that the money is due and owing, and not admitting that the funds are in fact due and owing at the time of the Stipulation. Furthermore, the language in paragraph 27 of the Complaint states two alternative grounds for Stiles' interest in the Fund: breach of the Contract by Certified and the Stipulation. The Complaint alleges that Certified breached the Subcontract by not paying Vulcraft and that Stiles then withheld the remaining payments to Certified, thereby intimating that the default negated the contract and any rights Certified had to the money. Alternatively, Stiles alleges that the Stipulation removed any possible right Certified had to receipt of the subject funds, prior to service and filing of the IRS's Notice of Levy. Whether or not the Stipulation was accepted by the State court and became effective is a factual question that cannot be resolved at this time.

At this stage of the pleadings, Stiles has sufficiently alleged an interest in the Fund and a claim for wrongful levy to allow it to pursue this wrongful levy action. Without further factual development, the Court cannot make a definitive determination that the Stipulation stands as a binding admission that the funds that are the subject of this action were due and owed to Certified or that the funds belonged to another party, and were not in the possession and control of Stiles, at the time of the Notice of Levy.

B. Personal Jurisdiction over the Defendant

Although Defendant invoked Fed.R.Civ.P. 12(b)(7) as a basis for its motion to dismiss, it argues that the Court lacks personal jurisdiction over the Defendant Internal Revenue Service because the IRS lacks the capacity to sue or be sued — an argument more properly made under Fed.R.Civ.P. 12(b)(2). Plaintiff concedes in its response that the case was incorrectly styled against the "Internal Revenue Service" instead of the "United States of America." Plaintiff argues that the body of the Complaint properly implicates the United States, and asks the Court to simply issue an order correcting the style. Defendant did not comment upon this request in the reply. The Court finds that Plaintiff's argument and request are reasonable, particularly in light of the fact that the ad damnum clause of the Complaint does indeed seek judgment from the United States of America. Therefore, the style of the Complaint shall henceforth be changed to reflect that the Defendant is the United States of America and not the Internal Revenue Service.

Accordingly, it is

ORDERED AND ADJUDGED that Defendant's Motion to Dismiss [DE. 7] is DENIED. It is further

ORDERED AND ADJUDGED that the Clerk of Court shall change the style of this case to reflect that the Defendant is the United States of America, not the Internal Revenue Service. All further pleadings shall bear the corrected style. It is further

ORDERED AND ADJUDGED that Defendant shall file an answer to the Complaint within ten (10) days of the date of this Order. It is further

ORDERED AND ADJUDGED that Plaintiff's Motion for Extension of Time to Comply With Order Requiring Compliance With Local Rule 16.1 [DE. 6] is GRANTED. The parties shall comply with the Court's Pretrial Order [D.E. 41 and Local Rule 16.1 within 30 days of the date of this Order.


Summaries of

Stiles Corp. v. Internal Revenue Service

United States District Court, S.D. Florida
Nov 8, 2000
Case No. 00-6484-CIV-GOLD/SIMONTON (S.D. Fla. Nov. 8, 2000)
Case details for

Stiles Corp. v. Internal Revenue Service

Case Details

Full title:STILES CORPORATION, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant

Court:United States District Court, S.D. Florida

Date published: Nov 8, 2000

Citations

Case No. 00-6484-CIV-GOLD/SIMONTON (S.D. Fla. Nov. 8, 2000)