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United States District Court, Middle District of Pennsylvania

August 6, 2003


The opinion of the court was delivered by: Thomas Vanaskie, Chief Judge, District



On November 12, 1997, appellants Charles and Connie Daniels ("the Daniels") commenced proceedings under Chapter 13 of the Bankruptcy Code in the Bankruptcy Court for the Middle District of Pennsylvania.

During the course of the proceedings, the Internal Revenue Service timely filed a proof of claim in the amount of $138,952.81, consisting of a secured claim in the amount of $98,952.81, and an unsecured priority claim in the amount of $40,000. The secured part of the IRS claim reflected federal income tax assessments for the years 1989 and 1990 made after an examination of the debtors' federal income tax returns for those years. The unsecured part of the proof of claim reflected estimated liabilities for federal income taxes due for the years 1993 through 1996. Estimates were made because the debtors had failed to file individual income tax returns for those years. During the course of the Bankruptcy Court proceedings, the Daniels contested the [ Page 2]

authority of the IRS to impose and collect taxes from them, and refused to cooperate in the IRS efforts to calculate tax liability for the period 1993 through 1996. Eventually, the IRS moved to dismiss the bankruptcy proceeding under the provisions of 11 U.S.C. § 1307(c) (1).*fn1 Finding that the Daniels' position as to the ability of Congress to levy income taxes was erroneous, and in view of the Daniels' resistence to legitimate efforts to gain information as to the specific amount of taxes due, the Bankruptcy Court, on April 6, 2001, granted the motion of the IRS to dismiss the bankruptcy case. See In re Daniels, No. 5-97-03361, 2001 WL 758697 (M.D. Pa. Bankr. April 6, 2001).

On May 4, 2001, the Daniels filed a notice of appeal from the Bankruptcy Court's April 6, 2001 Order. The IRS moved to dismiss the appeal as having been filed untimely. By Memorandum and Order dated May 29, 2002, the IRS motion to dismiss the appeal was granted. See In re Daniels, No. 3:CV-01-1296, 2002 WL 850191 (M.D. Pa. March 29, 2002) (C.J. Vanaskie).

On or about March 25, 2002, the Daniels filed a motion in the Bankruptcy Court, invoking Rule 60(b) of the Federal Rules of Civil Procedure. Although the motion has not been made part of the record before this Court, the Daniels apparently sought to set aside the April [ Page 3]

6, 2001 Order of the Bankruptcy Court on the ground that the IRS had committed fraud. Following a telephonic hearing conducted on April 30, 2002, the Bankruptcy Court denied the Daniels' Rule 60(b) motion. A notice of appeal was filed by the Daniels on May 10, 2002, and docketed in this court on June 11, 2002. The Daniels seek reversal of the order denying their Rule 60(b) motion.

Rule 60(b) (3) of the Federal Rules of Civil Procedure authorizes a court a relieve a party from a final judgment for, inter alia, "fraud . . ., misrepresentation, or other misconduct of an adverse party." Fed.R.Civ.P. 60(b) (3). The movant must show that the adverse party engaged in fraud or other misconduct in order to obtain the judgment or final order. See Optimal Health Care Services Inc. v. Travelers Ins. Co., 801 F. Supp. 1558, 1561 (E. D. Tex. 1992). "Rule 60(b) (3) seeks to rectify judgments improperly entered because of misrepresentations and unfair litigation tactics, not to provide a backdoor to undermine an otherwise valid merit-based dismissal of an action based on fraud or dishonesty." Id. As explained in 11 Wright, Miller & Kane, Federal Practice and Procedure, § 2860, at 312-14 (2d ed. 1995):

[T]he burden of proof of fraud is on the moving party and that fraud must be established by clear and convincing evidence. Further, the fraud must have prevented the moving party from fully and fairly presenting his case . . . The motion is addressed at the sound discretion of the court. The motion will be denied if it is merely an attempt to re-litigate the case if the court otherwise [ Page 4]
concludes that fraud or misrepresentation has not been established. [Emphasis added.]
The briefs filed by the Daniels in this Court make clear that the Daniels are merely seeking to re-litigate their challenges to the authority of the IRS to impose and collect taxes. For example, the Daniels assert that they "filed a motion pursuant to Federal Rule of Civil Procedure 60(b) to attain relief in the form of a hearing to express their issues which had been on numerous times . . . presented and intentionally overlooked by the Court and the government, and to have a meaningful hearing on the same." (Dkt. Entry 3 at unnumbered page 2.) The Daniels' claim of fraud on the part of the IRS concerns their argument that the IRS lacked the authority to file a notice of lien and notice of levy. The Daniels do not contend that the IRS engaged in some fraudulent or other inequitable conduct during the course of the bankruptcy case that prevented the Daniels from fully presenting their case. On the contrary, the Daniels allege that it was action taken by the IRS that compelled the filing of the bankruptcy petition in the first place.

A final Order was entered by the Bankruptcy Court on April 6, 2001, dismissing the Daniels' Chapter 13 petition. Although the Daniels may be upset with the outcome of those proceedings, they have not presented a challenge cognizable under Rule 60(b) to upset the finality of that Order. [ Page 5]


1. The Order of the Bankruptcy Court dated April 30, 2002 is AFFIRMED.

2. The Clerk of Court is directed to mark this matter CLOSED.

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