Unpublished Disposition, 923 F.2d 864 (9th Cir. 1989)

MEMORANDUM^* 

Richard and Leona Kohnke (Kohnkes) appeal from a district court judgment reducing their tax assessments to judgment, finding that tax liens had attached to all of the Kohnkes' property, and setting aside certain conveyances of property made by the Kohnkes. We affirm.

The Internal Revenue Service (Government) determined in 1981 that the Kohnkes had failed to report their income adequately for the years 1974 through 1979. The Government issued notices of deficiency, and the Kohnkes petitioned the tax court for redetermination of liability. On January 13, 1984, the tax court dismissed the petition for failure to properly prosecute, and accepted the Government's determination of deficiency. The Kohnkes appealed the determination to this court, which summarily affirmed. Kohnke v. Commissioner, Docket No. 84-7256 (9th Cir., Nov. 5, 1984). Because the Kohnkes did not file a bond pending appeal under section 7485,¹  the Government assessed the deficiency on June 8, 1984, by the recordation of certificates of assessment. Notice was provided to Leona Kohnke on June 8, July 23, and August 6, 1984. Notice was provided to Richard Kohnke on June 8 and July 23, 1984.

The Government filed a complaint in the district court in 1983, seeking to reduce the tax assessments to judgment, and to set aside fraudulent conveyances of property by the Kohnkes.

On November 17, 1986, the Government moved for partial summary judgment as to the Kohnkes' liability for the unpaid taxes on the ground that the Kohnkes had litigated the issue of their tax liability in the tax court and that res judicata therefore barred relitigation of the issue. The Kohnkes' opposition to the motion did not address the issue of res judicata, but rather argued that the sixteenth amendment was improperly ratified, and therefore of no legal effect. The district court granted the Government's motion for partial summary judgment on December 19, 1986.

At trial, the Kohnkes asserted that there was not a valid assessment of their tax liability after the tax court's decision, and that they never received notice of the assessment and demand for payment. However, the evidence at trial focused on the alleged fraudulent conveyances of property from the Kohnkes. No testimony or other evidence was offered on the issue of the validity or existence of the assessment. After a one-day trial, the district court ruled from the bench that there was a tax liability, an assessment, failure to pay after notice and demand, and that a tax lien had attached to all property owned by the Kohnkes. The court also found that certain conveyances of property by the Kohnkes had been fraudulent, and were therefore to be set aside.

Formal findings of fact and conclusions of law were filed July 20, 1989, and an order and judgment was also filed on that date. The Kohnkes filed a notice of appeal on June 27, 1989.

The Kohnkes argue that the district court erred in failing to consider the issue of whether a valid assessment existed. The Kohnkes' argument stresses the fact that until an assessment is made, no tax has been found to be owing.

The Kohnkes' claims in the district court and on appeal regarding the lack of a valid assessment are frivolous. It is clear from the district court record that assessments were made against the Kohnkes following the tax court's determination of their liability. It is also clear that notice was provided to the Kohnkes by the Government in mid-1984. The Kohnkes have never alleged that they requested a copy of their assessments pursuant to section 6203 or 26 C.F.R. Sec. 301.6203-1.

The Kohnkes also contend that the district court erred in failing to litigate the issue of whether notice and demand was properly made. However, the Kohnkes have not argued in their briefs that they did not receive notice of assessment and demand for payment pursuant to section 6303. Further, they do not appear to have raised this issue in the district court, other than when their son made that assertion in his opening statement at the trial. The Kohnkes never testified, nor did they ever submit an affidavit that they did not receive the notice required by the Internal Revenue Code. The Kohnkes argue that section 6303(a)²  requires that notice of an assessment must be given to a taxpayer before any lien can arise in favor of the Government. See United States v. Coson, 286 F.2d 453, 464 (9th Cir. 1961) (failure of Government to provide notice and demand makes lien against taxpayer's property void).

The form 4340 attached to the Government's motion for summary judgment indicates that notice was provided to the Kohnkes on June 8, 1984, and that delinquent notices were sent on July 23, 1984. Leona Kohnke was sent a second delinquent notice on August 6, 1984. The Kohnkes failed to allege or present any evidence that would refute the Government's evidence that notice was provided. In a motion for summary judgment, the nonmoving party may not rest on his pleadings, but must provide the district court with evidence of the existence of a disputed material issue of fact. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The Kohnkes did not make their required showing, and the district court did not err in refusing to reconsider the issue.

Regardless, our decision need not rest upon whether or not the Government ever provided notice to the Kohnkes under section 6303(a). Notice of assessment and demand for payment under section 6303 is unnecessary when the Government brings suit in a civil action to collect tax liabilities. The notice provision of section 6303 was designed to protect taxpayers from the summary administrative powers of the IRS, and such protection is unnecessary when a civil complaint gives a taxpayer notice that the government is proceeding against his property. See United States v. Chila, 871 F.2d 1015, 1018-19 (11th Cir.), cert. denied., 110 S. Ct. 498 (1989); Security Industrial Insurance Co. v. United States, 830 F.2d 581, 586-87 (5th Cir. 1987) (dicta); United States v. Berman, 825 F.2d 1053 (6th Cir. 1987).

The Kohnkes received sufficient notice by means of the civil action brought against them in the district court, and notice and demand under section 6303 would have been unnecessary to protect their rights.

The Kohnkes' argument that the district court erred in denying them discovery as to the issue of whether an assessment was recorded against them by the Government is without merit.

Federal Rule of Civil Procedure 26(b) (1) allows parties to obtain discovery on any subject relevant to the subject matter of the action. As noted supra, the Kohnkes never contested the validity of the assessments in the district court. We affirm the district court's ruling.

The Kohnkes argue that the district court lacked subject matter jurisdiction because the suit was never properly authorized as required by section 7401. Assuming, without determining, that the requirements of section 7401 are jurisdictional, we hold that the government's allegations of authority contained in the complaint are sufficient absent any specific challenge on the issue of authority in the district court. See United States v. Twenty-Eight "Mighty Payloader" Coin Operated Gaming Devices, 623 F.2d 510, 513 n. 2 (8th Cir. 1980); United States v. One 1941 Cadillac Sedan No. 5367924, 145 F.2d 296, 299 (7th Cir. 1944). The Kohnkes failed to challenge the government's authority under section 7401 in the district court, and thus authorization must be presumed.

AFFIRMED.