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GUNN v. MATHIS

December 12, 1957

C.C. GUNN (INDIVIDUALLY) AND C.C. GUNN PRODUCE COMPANY (A PARTNERSHIP COMPOSED OF C.C. GUNN AND EDDIE GUNN), PLAINTIFFS,
v.
CURTIS R. MATHIS, DISTRICT DIRECTOR OF INTERNAL REVENUE; JACK A. STOTTS, SENIOR COLLECTION OFFICER; AND TIM M. KRONE, REVENUE OFFICER (ALL OF THE DEFENDANTS BEING OFFICERS OR EMPLOYEES OF THE INTERNAL REVENUE SERVICE, UNITED STATES TREASURY DEPARTMENT), DEFENDANTS.



The opinion of the court was delivered by: John E. Miller, District Judge.

The plaintiff, C.C. Gunn, is a citizen of Arkansas and resides at Van Buren in Crawford County, Arkansas. The plaintiff, C.C. Gunn Produce Company, is a partnership composed of C.C. Gunn and Eddie Gunn, husband and wife. The office and principal place of business of such partnership is also located at Van Buren, Crawford County, Arkansas, in the Western District of Arkansas.

The defendant, Curtis R. Mathis, is District Director of the District of Arkansas, Internal Revenue Service, and resides at Little Rock, Pulaski County, in the Eastern District of Arkansas. The defendant, Jack A. Stotts, is a Senior Collection Officer, Internal Revenue Service, and likewise resides at Little Rock in the Eastern District of Arkansas. The defendant, Tim M. Krone, is a Revenue Officer, Internal Revenue Service, and resides at Fort Smith, Arkansas, in the Western District of Arkansas.

The plaintiff, C.C. Gunn, has been engaged in the buying and selling of farm produce for approximately 25 years. In 1945 the plaintiff, Eddie Gunn, became a partner in the business, and the business has since been operated as a partnership composed of plaintiffs, C.C. Gunn and wife, Eddie Gunn.

On April 27, 1956, the Tax Court entered decisions against plaintiff, C.C. Gunn, for the calendar years 1942 to 1946, both inclusive, finding that he owed large amounts of income tax for those years and civil fraud penalties for the years 1942 to 1944, both inclusive. On July 26, 1956, plaintiff Gunn filed his petition in the United States Court of Appeals for the Eighth Circuit for review of the Tax Court decisions. He was unable financially to pay the deficiencies found by the Tax Court, and was also unable to make bond to stay assessment and collection of the taxes and penalties, and prosecuted his petition for review in the Court of Appeals without paying the deficiencies and without making bond.

Section 7485 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 7485, provides that a petition for review of a Tax Court decision shall not operate as a stay of assessment or collection of any portion of the amount of the deficiency determined by the Tax Court, unless the petitioner files with the Tax Court a bond in a sum fixed by the Tax Court not exceeding double the amount of the portion of the deficiency in respect of which the petition for review is filed, and with surety approved by the Tax Court, conditioned upon the payment of the deficiency as finally determined, together with any interest, additional amounts, or additions to the tax provided for by law.

On August 31, 1956, while the petition for review was pending in the Court of Appeals, representatives of the Internal Revenue Service assessed the additional income taxes, interest and penalties against plaintiff, C.C. Gunn, and on October 26, 1956, filed of record a notice of federal tax lien with the Circuit Clerk of Crawford County, Arkansas, and contemporaneously therewith demanded payment of plaintiff Gunn of said taxes, interest and penalties, as found by the Tax Court. Following such demand there were extended negotiations between the plaintiff, C.C. Gunn, and representatives of the Internal Revenue Service, which resulted in the execution of a written agreement, by the terms of which Gunn agreed to make payment in four annual installments beginning with the date of the agreement, March 16, 1957. The agreement specifically provided that the plaintiff did not admit the validity of the asserted tax liability nor of the assessment thereof, and did not waive any of his legal rights, including the right to prosecute his petition for review of the Tax Court decisions then pending in the Court of Appeals.

On August 8, 1957, the Court of Appeals by opinion and judgment affirmed the decision of the Tax Court as to the calendar years 1945 and 1946, but reversed as to the calendar years 1942, 1943, and 1944, and remanded the case for further proceedings as to those three years. See, Gunn v. Commissioner of Internal Revenue, 8 Cir., 247 F.2d 359. Following the decision of the Court of Appeals, plaintiff tendered the amount due for the years 1945 and 1946, and requested defendants to cancel or withdraw the purported assessment and lien for the calendar years 1942, 1943, and 1944.

Section 6213(a) of the Internal Revenue Code of 1954, 26 U.S.C.A. § 6213(a) provides:

    "Within 90 days * * * after the notice of
  deficiency authorized in section 6212 is mailed * * *
  the taxpayer may file a petition with the Tax Court
  for a redetermination of the deficiency. Except as
  otherwise provided in section 6861 no assessment of a
  deficiency in respect of any tax imposed by subtitle
  A or B and no levy or proceeding in court for its
  collection shall be made, begun, or prosecuted until
  such notice has been mailed to the taxpayer, nor
  until the expiration of such 90-day * * * period as
  the case may be, nor, if a petition has been filed
  with the Tax Court, until the decision of the Tax
  Court has become final. Notwithstanding the
  provisions of section 7421(a), the making of such
  assessment or the beginning of such proceeding or
  levy during the time such prohibition is in force may
  be enjoined by a proceeding in the proper court."

The plaintiff, C.C. Gunn, in the instant suit "tenders payment to defendant, Mathis, in his official capacity as District Director of Internal Revenue, or otherwise in accordance with his instructions as such District Director, of unpaid deficiencies and interest for the years 1945 and 1946 as found by the Tax Court and affirmed by the United States Court of Appeals for the Eighth Circuit; and both plaintiffs pray that after notice as required by law, the defendants and each of them be temporarily enjoined from making any levy, seizure or distraint under the pretended authority of such purported assessment or assessments, lien or liens; that after service has matured and this cause has been fully heard by the Court such temporary injunction be made permanent; that plaintiffs recover from the defendants their costs of suit; and for such other and further relief as to the Court may seem proper."

As a practical matter the plaintiffs are seeking to expunge from the records of Crawford County, Arkansas, and such other counties in which the lien may have been filed, the notice of federal tax lien filed by the representatives of the Internal Revenue Service following the deficiency assessment of taxes, interest and penalties on August 31, 1956, while the petition for review of the Tax Court decisions was pending in the United States Court of Appeals for the Eighth Circuit.

Summons was served by the United States Marshal for the Western District of Arkansas on Honorable Charles W. Atkinson, United States District Attorney for the Western District of Arkansas, and on defendant, Tim M. Krone, a Collection Officer of the Internal Revenue Service, at Fort Smith, Arkansas. Also, the Marshal sent by registered mail two copies of the summons and complaint to the Attorney General of the United States at Washington, D.C., and a copy of the summons and complaint to the Internal Revenue Service, U.S. Treasury Department, Washington, D.C.

The United States Marshal for the Eastern District of Arkansas served the defendants, Curtis R. Mathis, District Director of Internal Revenue, and Jack A. Stotts, Senior Collection Officer of the Internal Revenue Service, with a copy of the complaint and summons at 208 Federal Building, Little Rock, Arkansas, on November 18, 1957. On the same date service of summons was made upon the defendants, they were served with copy of a "Motion for Temporary Injunction".

On November 25, the defendants, Curtis R. Mathis, District Director of Internal Revenue, and Jack A. Stotts, Senior Collection Officer, Internal Revenue Service, filed a motion to dismiss the cause for the following reasons:

"1. The venue is improper;

"2. This Court is without jurisdiction;

    "3. The complaint fails to state a cause of action
  upon which relief can be granted."

On December 3, 1957, the defendant Krone filed a similar motion adopting the motion that had theretofore been filed by Mathis and Stotts.

A hearing on the motion for a preliminary injunction was originally set for November 27, but was continued by the Court until December 10, 1957. The defendants appeared by the United States Attorney for the Western District of Arkansas, and renewed their motions to dismiss. Action on the motions was deferred without prejudice to the contention of said defendants, and the plaintiffs proceeded to introduce the ore tenus testimony of plaintiff, C.C. Gunn, certain stipulations, and 14 exhibits. At the conclusion of the introduction of the testimony the Court took the claims of the parties under consideration.

The Court has reached the conclusion that the motions of defendants to dismiss for improper venue are well founded, and therefore the Court does not reach the merits of the claims of the plaintiffs.

Title 28 U.S.C.A. § 1391(b) provides:

    "A civil action wherein jurisdiction is not founded
  solely on diversity of citizenship may be brought
  only in the judicial district where all defendants
  reside, except as otherwise provided by law."

Title 28 U.S.C.A. § 1392(a) provides:

    "Any civil action, not of a local nature, against
  defendants residing in different districts in the
  same State, may be brought in any of such districts."

The plaintiffs contend that since the defendant Krone resides in the Western District of Arkansas, that the venue is proper. Contrarily, the defendants contend that since Mathis and Stotts are both residents of the Eastern District of Arkansas, they can only be sued in their official capacity in the jurisdiction of their official residence.

Rule 20, F.R.C.P., 28 U.S.C.A., among other things, provides:

    "All persons may be joined in one action as
  defendants if there is asserted against them jointly,
  severally, or in the alternative, any right to relief
  in respect of or arising out of the same transaction,
  occurrence, or series of transactions or occurrences
  and if any ...

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