v.

Richard Boandl, Revenue Agent;
Larry Rosenblum, Group Manager; Theodore J. Machowski, Reviewer;
Wayne Beyer, Chief, Examination Branch Three;
Carl Weiss, Chief, Quality Review Staff;
Robert Hilgen, Chief, Examination Division;
George Jessup, Revenue Officer; Raymond J. Pfeiffer, Group Manager;
Jennings L. West, Chief Collection Division; Thomas A. Wise,
Chief, Criminal Investigation Division; James T. Rideoutte, District Director;
Internal Revenue Service, Philadelphia District.

U.S. District Court, East. Dist. Pa. C.A., No. 84-3591, 1/23/85.

[Code Sec. 7426] Back reference: �5784K.20.

Case Background:

IRS agents seized bank accounts and placed a lien on the plaintiff's farm because they were concerned that she might have placed money belonging to a friend (who was under examination for tax deficiencies) into her personal bank accounts. They were held to have violated the plaintiff's constitutional rights. The seizure of the plaintiff's bank accounts and the lien placed against her farm were unreasonable, were in violation of her rights under the Fourth Amendment, were made without due process of law and were in violation of the Fifth Amendment to the Constitution. The IRS agents did not satisfy their burden of proving the affirmative defense of "good faith" immunity. They failed to show that they had a reasonable ground for belief and a good faith belief that their actions were in accordance with the law and IRS regulations. The agents had acted on their own without approval from their superiors and, prior to the seizure of the plaintiff's property, no notice was given to her of the proposed action. The court found that it was reasonable to award the plaintiff $250 for each day that she was deprived of her property, for a total of $67,000. The court declined to award punitive damages, however.

Memorandum Opinion and Order

WEINER, District Judge: Plaintiff brought this action against agents of the Internal Revenue Service in their individual capacity for alleged violations of the rights afforded her under the United States Constitution. By agreement of the parties, all of the defendants except Richard Boandl, Larry Rosenblum, George Jessup, Raymond J. Pfeiffer and James T. Rideoutte were dismissed out of the case. The case was tried to the court sitting without a jury.

The witnesses called by the plaintiff were Richard Boandl, Larry A. Rosenblum, Harry Joseph Schmidt, Thomas L. Treadway, Thomas Wise, John Percaccio, George Jessup, Shirley Ann Lojeski, Paul Sweterlitsch, Reed Denby, and Jennings L. West. The government called Ray Pfeiffer as its witness.

The facts of the case may be summarized as follows:

Plaintiff and a Thomas Treadway are companions and very best friends. Since 1980, Mr. Treadway has lived with the plaintiff on her farm in Pipersville, Pennsylvania. In December 1979, Agent Boandl was assigned to examine the 1977 tax return of Mr. Treadway. He subsequently examined the 1978, 1979 and 1980 tax returns of Mr. Treadway. In February 1982, Agent Boandl came to a final assessment against Mr. Treadway of approximately $247,000.00. Mr. Treadway did not agree to the assessment against him. Agent Boandl discussed the matter with his manager Agent Rosenblum, and they decided on a jeopardy assessment against Mr. Treadway because they were concerned that Mr. Treadway was selling his properties, and that the plaintiff was putting the funds from the sales into her personal bank accounts. Agents Boandl and Rosenblum recommended to their supervisors that the assessment be approved without informing the supervisors that they intended to take collection action against the plaintiff.

Agent Boandl testified that he never checked the grantor index nor the mortgage books in Doylestown, nor did he know what funds Treadway received from the sale of his two properties in March and June 1982. He also testified that he knew that Mr. Treadway had borrowed between $150,000.00 and $180,000.00 from El Paso, Inc.

On or about August 3, 1982, Agent Jessup filed a nominee lien against the plaintiff in the amount of approximately $247,000,00, and he seized plaintiff's bank accounts. Agent Jessup testified that he obtained no approval from his superior before filing the nominee lien. Prior to the seizure of plaintiff's property, no notice was given to her of the proposed action.

On September 23, 1982, an Internal Revenue Service appeals officer, John Percaccio, after conducting an administrative review, determined that the assessment against Mr. Treadway was not reasonable, and a letter was sent abating the assessment (see Plaintiff's Exhibit No. 11). Agents Boandl and Jessup attempted, without success, to have the decision of the appeals officer reversed.

The lien on plaintiff's farm was not released until November 30, 1982, and the seized funds not returned until January 1983. Agent Jessup testified that the delay was due to the lateness in his obtaining the abatement report, and for the manual cutting of checks for plaintiff. He excused it by stating "She got interest back on the moneys we had taken."

The plaintiff testified that she was a horse breeder and owned the farm in Pipersville which was attached by Jessup. After the lien was filed by Jessup, the plaintiff was threatened with foreclosure by banks which held mortgages on her farm. She couldn't run her horse business, had to borrow money to eat and pay the mortgages. She stated that she was humiliated, degraded, withdrawn and did not leave the farm because she was afraid that Jessup would come back and take something. She also, testified that she lost two prospective purchasers of her farm because of the lien.

To prevail in this action the burden is on the plaintiff to prove by a preponderance of the evidence that the Internal Revenue personnel, defendants in this action, violated plaintiff's constitutional rights. The court must determine whether the individual defendants had a reasonable ground for belief and a good faith belief that their actions were fully in accordance with the law and regulations. Buts v. Economou, 438 U.S. 478 (1978). "Qualified or 'good faith' immunity is an affirmative defense that must be pleaded by a defendant official." Harlow v. Fitzgerald, 457 U.S. 800, 815 (1982), citing Gomez v. Toledo, 446 U.S. 635 (1980). The "good faith" immunity is defeated if the official knew, or reasonably should have known that his action would violate the plaintiff's constitutional rights, or "if he took the action with the malicious intention to cause a deprivation of constitutional rights or other injury." Harlow at 815, citing Wood v. Strickland, 420 U.S. 308, 322 (1975). Government officials performing discretionary functions are generally shielded from civil damages liability when their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known. Harlow at 818. Federal courts have the power to award damages for violation of constitutionally protected interests. Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 399 (1971).

We find that the plaintiff has sustained her burden of proving that her constitutional rights were violated by defendants Boandl and Jessup. The seizure of plaintiff's bank accounts, and the lien placed against her real property were unreasonable and in violation of her rights under the Fourth Amendment. The seizure of plaintiff's bank accounts and lien placed against her real property were made without due process of law and in violation of the Fifth Amendment.

We must now determine whether the defendants Boandl and Jessup satisfied their burden of proving the affirmative defense of "good faith" immunity. We find that they have failed to satisfy their burden. Their testimony failed to show that they had a reasonable ground for belief and a good faith belief that their actions were fully in accordance with the law and regulations. Internal Revenue service regulations provide that extreme caution must be taken before filing a nominee lien. Neither Boandl nor Jessup used any caution. They acted on their own without obtaining approval from superiors. Their actions and tactics were certainly not in keeping with the rules and regulations of the Internal Revenue Service. Jessup repeatedly testified that he didn't need authority from any superior to do what he did, and that he alone could make the determination. We find, therefore, that the plaintiff is-entitled to an award of actual or compensatory damages.

We must now consider the elements of damages claimed by the plaintiff. She testified that the placing of the lien on her real property prevented her from selling the property, with resultant damage to her. We do not agree with that contention. The worst that would have happened if she sold the property would have been that title company would have withheld from the proceeds due her, the amount of the clear title. Thus, we refuse that element of damage.

However, based on the uncontradicted testimony by the plaintiff, we find that the plaintiff's constitutional rights were violated by the defendants Boandl and Jessup, and that plaintiff was injured as follows:

1. She lost two insurance policies, a health and life policy, because she did not have the funds to pay the premium.
2. She was threatened with foreclosure of her real estate because she didn't have the funds to make her mortgage payment.
3. She couldn't run her horse business because of the lack of funds to buy feed and other items.
4. She was sued by one supplier because she did not have the funds to pay her bill.
5. She had to borrow money for food and to pay her mortgage.
6. She was humiliated, degraded and withdrawn.
7. She didn't leave the farm because she was ashamed to meet people, and for fear that Jessup would come back to the farm and remove her personal proper y.

The matter of resolving the amount of a damage award is always a troublesome problem since there is no precise formula for calculating damages. We must arrive at a figure which is based upon considerations of equity, reason and pragmatism. Mack V. Johnson, 430 F. Supp. 1139, 1151 (E. D. Pa. 1977), aff'd 582 F. 2d 1275 (3d Cir. 1978).

Some courts have awarded prisoners the sum of $25.00 per day for each day of wrongful segregated confinement. Id.; United States ex rel. Neal v. Wolfe, 346 F. Supp. 569 (E. D. Pa. 1972); Sostre v. Rockefeller, 312 F. Supp. 863 (S. D. N. Y. 1970), rev'd in part, sub nom., 442 F. 2d 178 (2d Cir. 1971), cert. denied, 404 U.S. 1049 (1972). In those cases the plaintiffs were already incarcerated, but were awarded damages for wrongful segregated confinement.

In the case sub judice, the plaintiff, prior to the levy, had free access to her bank accounts, and freedom to do what she wished with her real property. She had freedom of movement. The levy against her real property lasted approximately 118 days (from August 3, 1982 until November 30, 1992), and the money in her bank accounts was unavailable to her for approximately 150 days (from August 3, 1982 until the beginning of January 1983). Thus the plaintiff was deprived of her funds and/or her property for a total of 268 days. During that time she suffered from humiliation and degradation. Since the courts have approved a finding of $25.00 per day for an already incarcerated person whose constitutional rights are violated, we find that the sum of $250.00 per day is a reasonable per them amount for a person of the plaintiff's standing in life at the time of the violation of her rights by defendants Boandl and Jessup.

We, therefore, award the plaintiff the sum of $67,000.00 (268 days at $250.00 per day) as compensatory damages for the injuries which she suffered because of the conduct of defendants Boandl and Jessup.

The plaintiff has requested that she be awarded punitive damages as well as compensatory damages. Punitive damages "are never awarded as of right, no matter how egregious the defendant's conduct." Smith v. Wade, 461 U.S. 30, 52 (1983). On the other hand, once liability is found, a compensatory damage award is required to compensate the plaintiff for her loss. Id.

Punitive damages are awarded to punish the defendant for his outrageous conduct, and to deter him and others like him from similar future conduct. Id. at 54. "The focus is on the character of the tortfeasor's conduct-whether it is of the sort that calls for deterrence and punishment over and above that provided by compensatory awards." Id. We do not find that the defendants' conduct here is of such character, and we therefore deny an award of punitive damages.

Order

The court finds in favor of the plaintiff against defendants Richard Boandl and George Jessup in the amount of $67,000.00. judgment is entered in favor of the plaintiff against defendants Richard Boandl and George Jessup in the amount of $67,000.00.

The court finds in favor of defendants Larry Rosenblum, Raymond J. Pfeiffer, and James T. Rideoutte against the plaintiff.

Judgment is entered in favor of defendants Larry Rosenblum, Raymond J. Pfeiffer, and James T. Rideoutte against the plaintiff.

IT IS SO ORDERED.