F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 2 1997
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
DAVID PFLUM,
Plaintiff-Appellant,
v. No. 97-3040
(D.C. No. 96-4105-SAC)
UNITED STATES OF AMERICA, (D. Kan.)
Defendant-Appellee.
ORDER AND JUDGMENT *
Before BRORBY, LOGAN, and HENRY, Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore
ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Contending, among other things, that he is not a person liable for or subject
to federal income taxes, plaintiff-appellant David Pflum filed three separate
petitions in the United States District Court for the District of Kansas attempting
to quash three summonses issued to third-party recordkeepers by the Internal
Revenue Service (IRS) under the authority of 26 U.S.C. § 7602. One of the
summonses was directed to a Kansas financial institution; the other two were
directed at financial institutions located in California. Plaintiff argued that he
was not afforded proper notice of the issuance of the summonses.
Finding that it lacked subject matter jurisdiction under the provisions of
26 U.S.C. § 7609(c)(2)(B)(i) because the summonses were issued in aid of the
collection of an assessed tax liability, the district court dismissed each of
plaintiff’s petitions with prejudice. We affirm in part and reverse and remand in
part.
The IRS may issue a summons to any person having possession, custody, or
care of papers relevant to another’s tax liability except when the matter has been
referred to the Justice Department for criminal prosecution. See 26 U.S.C.
§ 7602. A proceeding to quash such a summons can be brought in federal district
court under the auspices of 26 U.S.C. § 7609(b)(2), with jurisdiction proper in the
district where the summoned person resides or is found, see 26 U.S.C.
§ 7609(h)(1). However, a court has no subject matter jurisdiction over such a
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proceeding if the summons was issued “in aid of the collection of [] the liability
of any person against whom an assessment has been made or judgment rendered.”
26 U.S.C. § 7609(c)(2)(B)(i).
Finding that each summons represented an attempt to collect on plaintiff’s
1989 federal tax liability, the district court concluded that plaintiff’s action was
barred by 26 U.S.C. § 7609(c)(2)(B)(i). Because the district court concluded that
“no district court would have jurisdiction to consider Pflum’s petition,” it
dismissed all three petitions with prejudice for lack of subject matter jurisdiction.
See R. tab 15 at 7 n.5. On appeal, petitioner argues that the district court erred in
concluding that the summonses were issued only to aid the collection of an
assessed tax and that it was further error for the district court to dismiss with
prejudice the petitions relative to the summonses directed to the California
financial institutions.
We begin by noting that the district court was without jurisdiction to
dismiss with prejudice the petitions relative to the California summonses.
Section 7609(h)(1) of title 26 of the United States Code states:
Jurisdiction.--The United States district court for the district within
which the person to be summoned resides or is found shall have
jurisdiction to hear and determine any proceeding brought under
subsection (b)(2) [a proceeding to quash] . . . .
This statute is not merely a venue statute, but is jurisdictional in nature. See Deal
v. United States, 759 F.2d 442, 443-44 (5th Cir. 1985) (citing Masat v. United
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States, 745 F.2d 985 (5th Cir. 1984)). A dismissal with prejudice “is a complete
adjudication of the issues presented by the pleadings.” Smoot v. Fox, 340 F.2d
301, 303 (6th Cir. 1964). Because the district court was without subject matter
jurisdiction to render an adjudication concerning the California summonses,
see Deal, 759 F.2d at 443-44; Dennis v. United States, 660 F. Supp. 870, 873
(C.D. Ill. 1987); Maikranz v. United States, 612 F. Supp. 590, 592 (S.D. Ind.
1985); Dial v. United States, 599 F. Supp. 475, 476 (S.D. Tex. 1984); Bilodeau v.
United States, 577 F Supp. 234, 235 (D. N.H. 1983), the court’s dismissal with
prejudice of plaintiff’s petitions regarding the California summonses is void.
See United States v. 51 Pieces of Real Property, Roswell, N. M., 17 F.3d 1306,
1309 (10th Cir. 1994); see also V.T.A., Inc. v. Airco, Inc., 597 F.2d 220, 224
(10th Cir. 1979). While we are sensitive to the effort by the district court to serve
the ends of judicial efficiency, it must be kept in mind that “[t]he jurisdiction of
the federal courts is carefully guarded against expansion by judicial interpretation
or by prior action or consent of the parties,” American Fire & Cas. Co. v. Finn,
341 U.S. 6, 17-18 (1951). We therefore reverse the district court’s dismissal with
prejudice of the petitions relative to the California summonses and remand with
instructions to dismiss those petitions without prejudice.
Turning to the merits of the petition to quash the Kansas summons, plaintiff
attempts to establish that the exception to jurisdiction of § 7609(c)(2)(B)(i) does
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not apply to him. In so doing, he quotes language from the House Report
pertaining to that statute to the effect that the exception to district court
jurisdiction over motions to quash applies only when the summons is issued
“solely for the purposes of collection.” Appellant’s Br. at 10. The word “solely,”
however, did not survive the legislative process and is not contained in the
statute, which provides simply that proceedings to quash are not authorized if a
summons is “in aid of the collection of [] the liability of any person against whom
an assessment has been made or judgment rendered.” 26 U.S.C.
§ 7609(c)(2)(B)(i); see also Patrick v. United States, No. 95-CV-70260, 1995 WL
611602, at *2 (E.D. Mich. Aug. 17, 1995).
The summons served by the IRS states that the recipient must give
testimony and provide data “relating to the tax liability or the collection of the tax
liability or for the purpose of inquiring into any offense connected with the
administration or enforcement of the internal revenue laws.” Appellant’s App.
at 20 (emphasis added). Further, the agent who caused the summons to be issued
testified that she did so in order to aid in the collection of a trust fund recovery
penalty assessed against plaintiff in 1989. R. Doc. 6. Ex. A. We find no error in
the district court’s conclusion that the summons here was issued in aid of the
collection of plaintiff’s delinquent taxes for purposes of 26 U.S.C.
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§ 7609(c)(2)(B)(i) and that, therefore, the district court lacked the subject matter
jurisdiction necessary to entertain a motion to quash.
Plaintiff’s argument based on various provisions of the Internal Revenue
Manual is unavailing. Even assuming that some of the provisions cited are
mandatory rather than directory, see Rosenberg v. Commissioner, 50 F.2d 529,
531-33 (10th Cir. 1971), and that some right accrues to a taxpayer by virtue of
these regulations, the existence of other forms upon which the IRS can issue a
summons does not change the fact that the summons issued here includes, as one
of its purposes, aid in the collection of an assessed tax liability. The fact that the
agent checked the box on the summons indicating that “[n]o notice is required”
satisfies the requirements noted by plaintiff.
The judgment of the United States District Court for the District of Kansas
is AFFIRMED with regard to the petition to quash the summons served on the
Kansas entity and REVERSED with regard to the remaining petitions. This case
is REMANDED with instructions to dismiss the remaining petitions without
prejudice.
Entered for the Court
Robert H. Henry
Circuit Judge
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