T.C. Memo. 2010-160
UNITED STATES TAX COURT
H. RICHARD SHUTTS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6322-04. Filed July 26, 2010.
On Mar. 22, 2005, P and R reached a basis of
settlement in a deficiency case. Two days later, P
filed for bankruptcy. On Apr. 12, 2005, during the
pendency of the bankruptcy action, this Court entered
decision pursuant to the parties’ agreement. R now
files a motion for leave to file a motion to vacate and
lodges a motion to vacate. P objects to the granting
of the motion.
Held: The Apr. 12, 2005 decision is void because
it was entered in violation of the automatic stay of 11
U.S.C. sec. 362(a)(8) (2000). R’s motion for leave and
R’s motion to vacate shall both be granted.
H. Richard Shutts, pro se.
Lisa M. Oshiro, for respondent.
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MEMORANDUM OPINION
ARMEN, Special Trial Judge: This matter is before the Court
on respondent’s motion for leave to file a motion under Rule 162
to vacate the stipulated decision entered on April 12, 2005, and
now final under section 7481(a)(1).1 At issue is whether the
Court lacked jurisdiction to enter the stipulated decision
because petitioner had filed a petition in bankruptcy on March
24, 2005, giving rise to the automatic stay imposed by 11 U.S.C.
section 362(a)(8) (2000).
Background
Petitioner resided in the State of Idaho when the petition
was filed on April 12, 2004.
On March 22, 2005, petitioner and respondent’s Appeals
Office reached a basis of settlement. Thereafter, petitioner’s
then-attorney and counsel for respondent signed the stipulated
decision, which decision was entered by the Court on April 12,
2005.
On March 24, 2005, just 2 days after the basis of settlement
had been reached, but before the stipulated decision had been
signed by counsel for the parties and entered by the Court,
petitioner filed a petition in bankruptcy under chapter 7 of the
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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Bankruptcy Code.2 The bankruptcy court issued a discharge on
July 13, 2005.
As stated above, respondent filed the Motion For Leave To
File Respondent’s Motion To Vacate Decision Out Of Time on
February 26, 2010. On that same day respondent also lodged a
Motion To Vacate Decision.
In response to an Order of the Court dated March 8, 2010,
petitioner filed an Objection to respondent’s motion for leave on
April 7, 2010. Petitioner concurrently has a case pending before
the Court that is the collection action that commenced upon entry
of the decision in the present case. Petitioner objects to the
granting of the motion for leave in this case on the grounds that
the motion was filed in the wrong action and that resolution of
the collection case would render the motion moot.
Discussion
Respondent desires to file a motion to vacate the stipulated
decision entered on April 12, 2005. Because neither party filed
a notice of appeal or a timely motion to vacate or revise that
decision, it became final on July 11, 2005, 90 days after it was
entered. See secs. 7459(c), 7481(a)(1).
2
Presumably, neither petitioner’s tax counsel nor counsel
for respondent was aware of the bankruptcy filing at the time
that the stipulated decision was entered. The Court was first
advised of that matter by respondent upon the filing of his
motion for leave.
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Rule 162 provides that a party seeking to vacate a decision
must file an appropriate motion within 30 days after the decision
is entered, unless the Court allows otherwise. Because
respondent did not file his motion to vacate within the 30-day
period, respondent has requested leave from the Court to file
that motion at this time.
The disposition of a motion for leave to file a motion to
vacate or revise a decision lies within the sound discretion of
the Court. See Heim v. Commissioner, 872 F.2d 245, 246 (8th Cir.
1989), affg. T.C. Memo. 1987-1; see also Toscano v. Commissioner,
441 F.2d 930, 938 (9th Cir. 1991) (Byrne, J., dissenting),
vacating 52 T.C. 295 (1969); Commissioner v. Estate of Long, 304
F.2d 136, 144 (9th Cir. 1962). Where a party legitimately
challenges the jurisdiction of this Court, however, the Court
should freely exercise that discretion, notwithstanding the time
of the challenge and even if the decision under attack is
otherwise final. See Brannon’s of Shawnee, Inc. v. Commissioner,
69 T.C. 999, 1002 (1978).
The Court has jurisdiction to vacate a decision that is
void, Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988), which
naturally means that the Court also has jurisdiction to grant a
motion for leave to file a motion to vacate a void decision,
Adkins v. Commissioner, T.C. Memo. 2005-260. Under the present
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setting, we shall grant respondent’s motion for leave to file
respondent’s motion to vacate.
We now turn to respondent’s motion to vacate. Once a
decision of this Court becomes final, we may vacate the decision
only in certain narrowly-circumscribed situations. See Helvering
v. N. Coal Co., 293 U.S. 191 (1934); Drobny v. Commissioner, 113
F.3d 670, 677 (7th Cir. 1997), affg. T.C. Memo. 1995-209; Curtis
v. Commissioner, T.C. Memo. 1996-371. The Courts of Appeals have
consistently held that the Tax Court lacks the authority to
vacate or revise an otherwise final decision on grounds such as
newly-discovered evidence or excusable neglect. Abatti v.
Commissioner, 859 F.2d 115, 117-118 (9th Cir. 1988), affg. 86
T.C. 1319 (1986). The Courts of Appeals have generally allowed
an exception to the usual rule of finality of section 7481 for
fraud on the Court. Id. at 118. In addition, the Courts of
Appeals, and in particular the Court of Appeals for the Ninth
Circuit, the court to which this case is appealable, has held
that the Tax Court may vacate a final decision if that decision
is shown to be void, or a legal nullity, for lack of jurisdiction
over the subject matter. Billingsley v. Commissioner, 868 F.2d
1081 (9th Cir. 1989); see also Roberts v. Commissioner, 175 F.3d
889, 892 n.3 (11th Cir. 1999).
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In the present case, respondent contends that the decision
entered on April 12, 2005, is void because it was entered in
violation of the automatic stay of 11 U.S.C. section 362(a)(8).
A bankruptcy filing generally triggers an automatic stay of
Tax Court proceedings concerning the debtor. Actions that are
subject to the automatic stay are set forth in 11 U.S.C. section
362(a). At the time petitioner filed for bankruptcy, 11 U.S.C.
section 362(a) provided in relevant part:
§ 362. Automatic stay
(a) Except as provided in subsection (b) of this
section, a petition filed under section 301, 302, or
303 of this title, or an application filed under
section 5(a)(3) of the Securities Investor Protection
Act of 1970, operates as a stay, applicable to all
entities of--
* * * * * * *
(8) the commencement or continuation of a
proceeding before the United States Tax Court
concerning the debtor.[3]
The automatic stay generally operates to temporarily bar
actions against or concerning the debtor or property of the
3
The Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005, Pub. L. 109-8, sec. 709, 119 Stat. 127, amended sec.
362(a)(8) of the Bankruptcy Code by striking out “the debtor” and
inserting “a corporate debtor’s tax liability for a taxable
period the bankruptcy court may determine or concerning the tax
liability of a debtor who is an individual for a taxable period
ending before the date of the order for relief under this title”.
This provision became effective with respect to petitions for
relief under the Bankruptcy Code filed on or after Oct. 17, 2005.
See id. sec. 1501, 119 Stat. 216. Because petitioner filed his
bankruptcy case on Mar. 24, 2005, this amendment does not apply
here.
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debtor or the bankruptcy estate. Allison v. Commissioner, 97
T.C. 544, 545 (1991). In a chapter 7 bankruptcy, such as that of
petitioner, and as applicable here, an automatic stay is
generally lifted only at “the time a discharge is granted or
denied.” 11 U.S.C. sec. 362(c)(2)(C) (2000).
The Court of Appeals for the Ninth Circuit has stated that
actions in violation of the automatic stay are void and not
merely voidable. Schwartz v. United States, 954 F.2d 569, 571
(9th Cir. 1992); see also Stringer v. Huet, 847 F.2d 549, 551
(9th Cir. 1988). One of those actions is the “continuation of a
proceeding before the United States Tax Court concerning the
debtor”. 11 U.S.C. sec. 362(a)(8) (2000).
Petitioner filed his Tax Court petition on April 12, 2004.
On March 24, 2005, petitioner filed a petition in bankruptcy,
which temporarily barred the continuation of petitioner’s pending
Tax Court case. See 11 U.S.C. sec. 362(a)(8). Petitioner was
granted a discharge on July 13, 2005, bringing to an end the
automatic stay. See id. sec. 362(c)(2)(C). But the stipulated
decision was entered on April 12, 2005, during the period of time
that the automatic stay was in effect. Thus, the entering of the
decision violated the automatic stay, and that decision is,
therefore, void. Given that the stipulated decision is void, we
shall grant respondent’s motion to vacate the decision.
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Conclusion
Finally, in reaching the conclusions described herein, we
have considered all arguments made by petitioner, and, to the
extent not mentioned above, we find them to be moot, irrelevant,
or without merit.
To reflect the foregoing,
An appropriate order will
be issued.