Jimmie L. Williams and Annie W. Williams, Jimmie L. Williams, Personal Representative v. Commissioner

119 T.C. No. 17

• Court: United States Tax Court
• Decided: December 12, 2002
• Docket: 16771-98
• Status: Unknown

Opinion

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. - 2 -

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. - 3 -

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. - 4 -

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 - 5 -

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. - 6 -

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 - 7 -

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. - 8 -

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. - 9 -

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 - 10 -

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 - 11 -

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 - 12 -

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. - 13 -

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 - 14 -

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.