119 T.C. No. 17
UNITED STATES TAX COURT
JIMMIE L. WILLIAMS AND ANNIE W. WILLIAMS, DECEASED, JIMMIE L.
WILLIAMS, PERSONAL REPRESENTATIVE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16771-98. Filed December 12, 2002.
P, on three separate occasions, advised the Court
and R that he had filed petitions in bankruptcy. In
each instance, P’s statement that he had filed a
bankruptcy petition was intended to invoke the
automatic stay on this Court to avoid compliance with
this Court’s orders, to avoid trial, and to thwart this
Court’s Rules and procedures. On one of the occasions,
no petition had been filed and no bankruptcy proceeding
commenced. Instead, P submitted a forged bankruptcy
document to R and the Court. In each instance where a
bankruptcy petition was actually filed, P withdrew the
petition and caused the bankruptcy to be dismissed not
long after it was instituted.
R moved for dismissal of P’s case for lack of
prosecution, a penalty under sec. 6673, I.R.C., and a
sanction because of P’s disobedience,
avoidance, and resistance to this Court’s orders,
Rules, decrees, or commands.
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Held: R’s motion will be granted. P is liable
for a criminal fine under sec. 7456, I.R.C., as a
sanction for his misbehavior.
Jimmie L. Williams, pro se.
Michael W. Berwind, for respondent.
OPINION
GERBER, Judge: Respondent moved to dismiss this case for
lack of prosecution and for sanctions to be imposed on Jimmie L.
Williams (hereinafter petitioner). Respondent points out that
petitioner has been unresponsive to requests to settle or engage
in pretrial preparation in accord with this Court’s Rules and
orders. Respondent also contends that petitioner intentionally
and unnecessarily delayed and protracted this proceeding and
that a section 66731 penalty of $25,000 should be imposed upon
petitioner. In addition to the section 6673 penalty, respondent
contends that petitioner should be sanctioned or fined $5,000
because of petitioner’s misconduct and intentional avoidance of
this Court’s legal orders, Rules, decrees, or commands.
Respondent has shown that petitioner has intentionally
misrepresented facts in the form of oral and written
1
All section references are to the Internal Revenue Code,
in effect for the years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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misrepresentations (altered documents) which reflected that
petitioner had filed a bankruptcy petition, when in fact no
bankruptcy proceeding had commenced.
Background
On August 10, 1998, respondent mailed a notice of deficiency
to petitioners determining income tax deficiencies, additions to
tax, and accuracy-related penalties as follows:
Additions to Tax Penalty
Year Deficiency Sec. 6651(a)(1) Sec. 6662(a)
1994 $58,746 $14,127 $28,843
1995 122,126 11,749 24,425
A petition was filed on October 7, 1998. An amended petition was
filed on October 28, 1998, and respondent’s answer was filed on
December 30, 1998.
This case was first set for trial on the June 21, 1999, Los
Angeles, California, trial session. On June 3, 1999, petitioner
advised respondent that he had voluntarily petitioned into a
chapter 7 (liquidating) bankruptcy (bankruptcy 1). In support of
petitioner’s claim, he provided respondent with what purported to
be a copy of petitioner’s bankruptcy petition. Petitioner’s
purported bankruptcy petition reflected the bankruptcy court
docket No. LA99-19644AA. On June 10, 1999, the parties engaged
in a telephone conference with the Court, at which time a
discussion of petitioner’s alleged bankruptcy petition ensued.
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On the basis of petitioner’s representations, on June 21,
1999, the Court issued an order staying the Tax Court proceedings
in accord with 11 U.S.C. section 362(a)(8) (2000). That order
staying the proceedings resulted in the removal of petitioner’s
case from the June 21, 1999, Los Angeles, California, trial
session. In addition to the stay order, several status reports
filed with this Court reference petitioner’s alleged bankruptcy
proceeding. On February 1, 2000, petitioner advised respondent
that bankruptcy 1 had been dismissed, and that information was,
in turn, conveyed to the Court.
On May 12, 2000, this case was again scheduled for trial in
Los Angeles, California, on October 16, 2000. During the
pretrial period, petitioner ignored respondent’s offers to meet
as required by this Court’s Rules and pretrial order. Petitioner
failed to file a trial memorandum as required by the Court’s
pretrial order. On October 3, 2000, petitioner filed a chapter 7
bankruptcy case, docket No. LA00-37835EC (bankruptcy 2). On
October 10, 2000, an order was issued again to stay these
proceedings and remove this case from the October 16, 2000, trial
session.
On April 10, 2001, respondent advised the Court that
bankruptcy 2 had been closed. On May 15, 2001, this case, for
the third time, was placed on a Los Angeles, California, trial
session, beginning October 15, 2001. Once again, respondent
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offered to discuss the case with petitioner with a view to
settlement or trial preparation, but petitioner did not respond
to respondent’s invitation.
On July 31, 2001, respondent served petitioner with requests
for discovery and admissions, and petitioner failed to respond.
On August 31, 2001, respondent moved to compel petitioner’s
responses to discovery, and, on September 6, 2001, the Court
issued an order to show cause as to why sanctions should not be
imposed on petitioner. Petitioner was given until September 28,
2001, to respond to the Court’s order. On September 26, 2001,
without responding to the Court’s order to show cause, petitioner
filed a petition in bankruptcy, docket No. LA01-38974EC
(bankruptcy 3). On October 3, 2001, the Court, for the third
time, stayed the proceedings in this case.
On October 5, 2001, respondent filed an emergency motion
with the bankruptcy court seeking to have the automatic stay
lifted with respect to bankruptcy 3 and, on October 12, 2001, the
bankruptcy court lifted the automatic stay. On October 17, 2001,
this Court issued an order reactivating the proceedings in this
case. Thereafter, respondent filed his motions to dismiss and
for sanctions, both of which were set for a hearing at a special
session of the Court at Los Angeles, California, on May 13, 2002.
Petitioner did not appear at the hearing.
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Respondent’s motion for sanctions was supported by the
written declaration by a representative of respondent’s counsel’s
office, dated October 1, 2001. The declaration explained that
the bankruptcy court’s files were examined and that docket No.
LA99-19644AA (the docket number shown on the purported petition
for bankruptcy 1) involved the bankruptcy of one Zakarian Arsen.
In addition, a search of the bankruptcy court’s records did not
reveal that petitioner had filed a bankruptcy proceeding during
the period reflected in the purported bankruptcy petition.
Discussion
A. Respondent’s Motion To Dismiss for Lack of Prosecution
Respondent has moved to dismiss this case because of
petitioner’s lack of prosecution. We note that respondent does
not bear the burden of proof on any portion of the determined
deficiencies in income tax, additions to tax, or accuracy-related
penalties. Petitioner has ignored this Court’s orders and has
failed to either prepare for trial or appear at scheduled
hearings. Petitioner has intentionally delayed this case on
three separate occasions by advising of bankruptcy proceedings,
both real and alleged, and interposing the automatic stay to
avoid trial and compliance with this Court’s orders. In
addition, petitioner has ignored all of respondent’s invitations
to settle or to stipulate. Petitioner has not attempted and
never intended to pursue the determined deficiencies on their
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merits. For those reasons, respondent’s motion to dismiss for
lack of prosecution will be granted pursuant to Rules 53 and
123(b), and a decision entered for the full amount of the
determined deficiencies, additions to tax, and accuracy-related
penalties. See Johnson v. Commissioner, 116 T.C. 111, 117
(2001), affd. 289 F.3d 452 (7th Cir. 2002); Freedson v.
Commissioner, 67 T.C. 931, 935 (1977), affd. 565 F.2d 954 (5th
Cir. 1978).
B. Respondent’s Motion for a Penalty Under Section 6673
Section 6673(a)(1) authorizes the Court to impose a penalty,
not to exceed $25,000, against taxpayers who institute or
maintain proceedings primarily for delay. Respondent contends
that petitioner’s 3-year pattern of conduct in this case reflects
that he was dilatory and intended to delay the proceedings in
this case. Respondent lists the following facts, which show
petitioner’s dilatory conduct:
(a) once fictitiously and twice actually used the
bankruptcy courts at the last possible moment to delay
proceedings in this case;
(b) failed to appear at the calendar calls on June
10, 1999, and October 15, 2001, and at the recall of
the case on October 17, 2001;
(c) failed to comply with any of the Court’s
orders to file status reports, the Court’s September
16, 2001 Show Cause Order or any of the Court’s three
pre-trial orders; and
(d) failed to reply to either of respondent’s two
invitations to settle the case or prepare it for trial,
or to answer any of respondent’s discovery requests.
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Petitioner’s conduct shows that he instituted and/or
maintained this proceeding primarily for delay. Although
respondent attempted to engage petitioner in settlement or trial
preparation activity, petitioner was unresponsive and failed to
comply with this Court’s pretrial order and Rules. See Bagby v.
Commissioner, 102 T.C. 596, 614 (1994); Stamos v. Commissioner,
95 T.C. 624, 638 (1990), affd. without published opinion 956 F.2d
1168 (9th Cir. 1992).
More significantly, petitioner improperly interposed the
automatic stay of the Bankruptcy Code to delay this Court’s
proceedings and to avoid compliance with this Court’s order to
show cause. On three occasions, petitioner interposed the
automatic stay of the Bankruptcy Code by filing or purporting to
file a bankruptcy petition shortly before his Tax Court case was
scheduled for trial. The petitions into bankruptcy occurred
shortly before each scheduled trial session or date for
petitioner’s compliance with this Court’s orders. In each
instance, the trial sessions had been scheduled for at least 5
months before petitioner’s last-minute connivance causing the
delay of this Court’s proceedings. Moreover, none of
petitioner’s bankruptcy proceedings were allowed to mature. On
both occasions, petitioner closed the bankruptcy proceeding a
short time after he had filed the bankruptcy petition.
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Petitioner allowed the bankruptcy proceeding to exist just long
enough to avoid this Court’s orders and process.
Petitioner’s conduct in this proceeding was intended to
delay the proceeding, and the results of his actions were
burdensome both to the bankruptcy court and to this Court. See
Anders v. Commissioner, T.C. Memo. 1999-294. Petitioner’s
tactics resulted in an extraordinary and substantial waste of
resources. Accordingly, we hold petitioner liable for a $25,000
penalty pursuant to section 6673.
C. Respondent’s Motion for a Monetary Sanction or
Fine Against Petitioner for Abuse of Process
Respondent has moved that the Court impose an additional
$5,000 sanction against petitioner with respect to his false
claim of bankruptcy filing, which included misrepresentations and
presentment of a forged document to the Court and respondent.
During June 1999, petitioner represented to respondent and to the
Court that he had filed a proceeding in the bankruptcy court.
Relying on petitioner’s oral and written representations, the
Court issued an order staying the Tax Court proceedings. See
11 U.S.C. sec. 362(a)(8).
Respondent points out that all courts are vested with the
inherent “power to impose silence, respect, and decorum, in their
presence, and submission to their lawful mandates”. Anderson v.
Dunn, 19 U.S. 204, 227 (1821). It is established that this Court
has
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inherent power and authority to regulate and supervise
proceedings before it so as to insure the integrity of
its processes. See Freytag v. Commissioner, 501 U.S.
868, 891 (1991); Chambers v. NASCO, Inc., 501 U.S. 32,
43-46 (1991). The Court’s inherent power extends to
regulate both conduct before it and conduct beyond its
confines. See Chambers v. NASCO, Inc., supra at 44.
The Court has recognized its authority to maintain the
integrity of its proceedings and its ability to provide
relief for a party’s misconduct. See, e.g. Dixon v.
Commissioner, T.C. Memo. 2000-116 (imposing additional
sanctions, some on the basis of inherent power); Dixon
v. Commissioner, T.C. Memo. 1999-101; CMEM, Inc. v.
Commissioner, T.C. Memo. 1991-467.
Crop Associates-1986 v. Commissioner, T.C. Memo. 2000-216.
In addition to our inherent power, section 7456(c), as
pertinent to this case, provides that
The Tax Court and each division thereof shall have
power to punish by fine or imprisonment, at its
discretion, such contempt of its authority, and none
other, as--
(1) misbehavior of any person in its presence or
so near thereto as to obstruct the administration of
justice;
* * * * * * *
(3) disobedience or resistance to its lawful writ,
process, order, rule, decree, or command.
We consider, however, whether it would be appropriate to
impose a sanction on petitioner in addition to the $25,000
penalty for his institution or maintenance of this proceeding for
purposes of delay. The $25,000 penalty under section 6673, as
explained above, was imposed because of petitioner’s obvious
pattern of delay and extensive waste of the resources of the
court system and the Government. However, petitioner’s false
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June 1999 bankruptcy petition; the intentional interposition of
automatic stays to thwart this Court’s orders, Rules, or
commands; and his intentional misrepresentation regarding the
nonexistent bankruptcy proceeding deserve separate rebuke.
In that regard, contempt of court may be civil or criminal,
depending upon the purpose being served. Ryan v. Commissioner,
67 T.C. 212, 222 (1976), affd. 568 F.2d 531 (7th Cir. 1977).
“[C]ivil contempt is coercive and remedial in character whereas
criminal contempt is punitive to vindicate the authority of the
Court. See, e.g., Gompers v. Buck’s Stove & Range Co., 221 U.S.
418 (1911); Shillitani v. United States, 384 U.S. 364 (1966).”
Id.
Petitioner’s dilatory tactics were carried out in
disobedience and defiance of this Court’s Rules, orders, or
command. The false documentation and misrepresentations were
acts intended to obstruct the administration of justice.
Accordingly, it is appropriate to impose a criminal sanction
under section 7456 for petitioner’s misbehavior under section
7456, in addition to the $25,000 penalty imposed under section
6673.
Because of the possibility of monetary fine’s being imposed
as a criminal sanction on petitioner, he was provided with an
opportunity to show cause why such a fine should not be imposed.
This was accomplished by the issuance of a Notice and Order to
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Show Cause on June 25, 2002, which was personally served on
petitioner by a U.S. Marshal on July 25, 2002.2 In that Notice
and Order, petitioner was again advised of respondent’s
allegations, and he was given an opportunity to show cause, in
writing, why such a fine should not be imposed.
Petitioner responded in writing and, in essence, made the
following contentions in an attempt to show cause: (1) He is a
“law abiding citizen”, (2) he relied on other unnamed
individuals, including a paralegal, to handle his affairs during
this period, and (3) he was ill and/or under medication during
the period under consideration.3
Petitioner’s attempt to blame the forged bankruptcy petition
on others falls short of the mark. He has not identified the
person who he alleged caused the forgery of the bankruptcy
petition. In addition, petitioner in a telephone conference with
the Court and by submission of the bankruptcy petition to
respondent represented that he had filed for bankruptcy.
Petitioner advised respondent and the Court of the filing of the
petition and advised respondent of the dismissal of bankruptcy 1.
Petitioner must have been aware, throughout the 8-month period in
2
We note that petitioner had failed to appear and/or to
respond to respondent’s motion for these sanctions which had been
scheduled for a hearing at a special session of the Court at Los
Angeles, Cal., on May 13, 2002.
3
The period under consideration is almost 4 years.
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which he interposed the automatic stay of the Bankruptcy Code,
that no such proceeding had been instituted. Petitioner offered
no document to show that bankruptcy 1 had been dismissed.
Even if we were able to believe that petitioner had been
deceived by another person as to the forged bankruptcy petition,
on several occasions he interposed the automatic stay at critical
stages of this proceeding: To avoid compliance with this Court’s
orders, to avoid long-scheduled trial dates on the eve of trial,
and otherwise to elude this Court’s orders, Rules, procedures,
and process. Although petitioner purported to file three
separate bankruptcy actions, none were pursued. In the two
instances where petitions in bankruptcy were actually filed, it
was no coincidence that petitioner withdrew the petitions and
caused the dismissal of the bankruptcy proceedings each time the
automatic stay had served his purpose of avoiding and obstructing
the proceedings in this Court. Such conduct was clearly
intentional and constitutes “disobedience or resistance to * * *
[this Court’s] lawful writ, process, order, rule, decree, or
command.” See sec. 7456(c).
Respondent moved that the Court impose a $5,000 sanction for
petitioner’s conduct in this proceeding. The purpose of
penalizing petitioner in these circumstances is to impress upon
him that his misbehavior will not be tolerated and that he must
respect the process and obey the lawful orders of this Court. In
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Ryan v. Commissioner, supra at 223, this Court imposed a $1,000
criminal fine for repeated contumacious failure to answer
interrogatories. In this case, petitioner also ignored and
attempted to avoid this Court’s order enforcing respondent’s
discovery request by interposing the automatic stay. In this
case, petitioner intentionally misrepresented and wrongfully
interposed the automatic stay to frustrate and ignore the lawful
orders, Rules, and process of this Court. The effect of
petitioner’s conduct in this case is more serious and more
deceitful than the taxpayer’s conduct in Ryan. We note that the
$1,000 fine in Ryan was imposed more than 25 years ago.
In order to impress petitioner with the seriousness of this
matter and to fine him for his conduct in criminal contempt of
this Court, we hold petitioner unconditionally liable for a fine
of $5,000.
To reflect the foregoing,
An appropriate order and
decision will be entered for
respondent.