On Appeal from the United States District Court for the District of New Jersey, D.C. No. 82-3761.
SLOVITER, BECKER and GARTH, Circuit Judges.
This appeal arises from a civil action brought by the IRS against Robert and Kathleen Asmar seeking judgment for income tax deficiencies, penalties and interest for the years 1965-1968. Kathleen Asmar Rosenbaum (Asmar), among other defenses, asserts that the IRS was estopped to obtain judgment against her.
The acts that Asmar claims constitute estoppel are a series of representations made to her by low-level Internal Revenue Service employees. Asmar asserts that it was represented to her that the IRS would not take action against her to collect an adjudicated tax liability, but, rather that the IRS would seek payment from her former husband and joint obligor, Robert Asmar. The district court ruled in Ms. Asmar's favor. We reverse.
Married in 1957, Kathleen and Robert Asmar separated in 1973, and obtained a divorce decree in November of 1977. In 1976, the Tax Court held that the Asmars were jointly and severally liable for substantial tax deficiencies for the tax years 1965 through 1958. See Asmar v. Commissioner, T.C. Memo 1976-213, 1976 T.C. Memo 213, 35 T.C.M. (CCH) 930 (1976). The Tax Court held Kathleen Asmar was not entitled to an innocent spouse exemption from tax liability. In addition, the Tax Court, holding that Robert Asmar committed fraud by underreporting his tax liability, assessed fraud penalties against Robert individually. The outstanding joint tax liability, including interest, totalled $60,867.31 in November 1982. Robert Asmar's individual liability for the assessed fraud penalties stood at $22,749.31 at the same point in time. At oral argument before this court, it was estimated that the current outstanding joint tax liability was approximately $100,000.
Following the 1976 tax adjudication, the IRS began efforts to collect the joint tax liabilities of the Asmars and the individual liability of Robert Asmar. Kathleen Asmar was notified on November 10, 1976 that assessments were being made against both her and her estranged husband. The IRS demanded payment from Robert Asmar in January 1977, and he responded that he was unable to pay. In February 1977, the IRS demanded payment from Kathleen Asmar, who also responded that she was unable to pay. In January and March 1977, both Kathleen and Robert received notice of the imposition of federal tax liens on their property.
In August 1977, Revenue Officer Richard Byrnes, an IRS employee in the Asbury Park office, requested permission from the special procedures staff of the IRS to file a federal tax lien against East of Eden,*fn1 to prevent the transfer of the property while the tax liabilities were unpaid. Also during August 1977, Byrnes called Kathleen Asmar to schedule a meeting to discuss her tax liability. During the meeting, Kathleen Asmar signed an affidavit regarding the East of Eden business, stating that she owned 10 % of the corporation and her estranged husband owned the remaining 90 %. App. at 213-14.
The Asmars were legally divorced in New Jersey Superior Court on November 7, 1977. Under the terms of the divorce agreement, Kathleen Asmar received and now fully owns two houses on Seeley Avenue in Keansburg, New Jersey. Liens were placed on this property in February of 1977. She and her current husband reside in one of the houses, and her daughter and her daughter's family reside in the other. In addition to ordering the transfer of all title in the Seeley Avenue houses to Kathleen Asmar, the New Jersey Superior Court ordered that Robert Asmar hold Kathleen Asmar harmless from all liens and judgments in his name, or in the name of East Eden, and to pay the taxes outstanding on the property. App. at 60.
Soon after the divorce, in November of 1977, Byrnes called Kathleen Asmar again to make arrangements to pay off the tax lien on her property. Kathleen Asmar showed him a copy of her divorce agreement and was told by Byrnes that the IRS would proceed against Robert Asmar instead.
In January of 1978, the Regional Counsel of the IRS granted permission for a nominee lien*fn2 to be filed against East of Eden. Byrnes' request for a levy, however, was denied. In a memorandum dated February 21, 1978, Byrnes requested permission to institute an action to enforce the lien against East of Eden. At that time, Byrnes estimated that the forced sale value of the business would cover the total outstanding tax liabilities. App. at 218.
Over a year later, Byrnes sent a statement detailing the outstanding joint tax liabilities, dated March 23, 1979, to Kathleen Asmar. She testified at trial that she called Byrnes and told him that her attorney had called her to inquire whether she wanted to take legal action against her former husband to collect the back taxes under the terms of the divorce agreement. Byrnes advised her that she should not bother to spend $3,000 for attorney fees to bring an action against Robert, because the IRS was going to do the "same thing." App. at 268. Asmar testified that she informed her attorney of her conversation with Byrnes. Following the discussion with Byrnes, Kathleen testified that she began to cooperate actively with the IRS, by, among other things, informing Byrnes that Robert was hiding his assets by transferring them to relatives and friends.
In the summer of 1980, IRS agent Byrnes was transferred to the Toms River office, and retire shortly thereafter. When Asmar called the Asbury Park office, she was referred to Carl Auther. Asmar called Auther and told him that she was concerned that her former husband was transferring his property to avoid the tax lien on East of Eden, Inc. Asmar testified that Auther told her that the IRS was pursuing Robert for the taxes. She called again later and was supposedly told by Auther to "mind her own business" and that the IRS would bring an action against Robert Asmar when it was ready.
After the second call to Auther, Asmar had her lawyer, Joseph Defino, send a letter, dated December 10, 1981, to the IRS. The letter acknowledged that the two houses on Seeley Avenue were subject to the lien, and noted that the lien prevented the transfer of the property. The letter also stated that Robert Asmar had transferred property, including a liquor license, to his girlfriend. App. at 74-75. A second letter to the IRS, dated June 1, 1983, from Kathleen's current attorney, Richard Friedman, listed various assets held by Robert Asmar which could be used to satisfy the outstanding liabilities. App. at 71-73. As the government notes in ...