COURT WON'T DISMISS TRUSTEE'S REFUND CLAIMS FOR BANKRUPTCY ESTATE.

               IN THE UNITED STATES DISTRICT COURT

[2] Pursuant to 23 U.S.C. § 638(b)(1)(A) and the standing order of designation, this Court referred the case to United States Magistrate Judge Carl Horn for recommended disposition. In a "Memorandum and Recommendation and Order" filed May 17, 2000, Magistrate Horn recommended that Defendant's Motion to Dismiss be granted as to Claim I and denied as to Claim II. Plaintiff filed Objections to the "Memorandum and Recommendation and Order" on May 30, 2000. Defendant filed Objections to the "Memorandum and Recommendation and Order" on June 27, 2000. Plaintiff subsequently filed its "Response to Defendant's Objections and Reply in Favor of Plaintiff's Objections" an July 7, 2000. Plaintiff filed a "Supplemental Memorandum Regarding Magistrate's Memorandum and Recommendation" on September 25, 2001, to which the Government replied on October 18, 2001, in its "Response to Plaintiff's Supplemental Memorandum Regarding Magistrate Judge Horn's Memorandum and Recommendation." All of the Objections are deemed timely and are considered herein.

I. STANDARD OF REVIEW

[3] The Federal Magistrate Act provides that "a district court shall make a de novo determination of those portions of the report or specific proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1); Camby v. Davis, 718 F.2d 198, 200 (4th Cir. 1983); Keeler v. Pea, 782 F. Supp. 42, 43 (D.S.C. 1992). De novo review is not required by the statute when an objecting party makes only general or conclusory objections that do not direct the court to the specific error in the magistrate judge's recommendations. 0rpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982). Furthermore, the statute does not require any review at all of issues that are not the issue of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985); Camby, 718 F.2d at 200; Eaker v. Apfel, 152 F. Supp. 2d 863, 864 (W.D.N.C. 1998), Nonetheless, a district court judge is responsible for the final determination and outcome of the case, and, therefore, this Court has conducted a careful review of Magistrate Judge Horn's 'Memorandum and Recommendation and Order," as well as a de novo review of those issues specifically raised in Plaintiff's Objections.

II. STATEMENT OF FACTS AND PROCEDURAL BACKGROUND

[4] Plaintiff has not made specific or general objections to the findings of fact and procedural background contained in Magistrate Judge Horn's "Memorandum and Recommendation and Order." After a review of the record in this case, the Court adopts the factual findings made by the Magistrate Judge on pages one through five of his recommendation filed May 17, 2000.

III. DISCUSSION OF LAW

[5] Applying the careful standard of review to those portions of the Magistrate Judge's recommendation that were not specifically objected to, this Court finds that the Magistrate Judge's findings of fact are supported by the record and his conclusions of law are consistent with the current case law.

A. Plaintiff's Objections to Recommendation to Dismiss Claim I

[6] Plaintiff objects to Magistrate Judge Horn's recommendation to grant the Defendant's Motion to Dismiss as to Claim I, for failure to state a claim upon which relief can be granted. Specifically, Plaintiff objects to the Magistrate's application of the appropriate standard of review. Plaintiff correctly argues that motions to dismiss should not be granted unless it appears to a legal certainty that Plaintiff's claim cannot succeed under any set of facts proved in support of the claim. See McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 328 (4th. Cir. 1996) (en banc) (citing Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324, 325 (4th Cir. 1989)). Additionally, the facts must be construed in a light most favorable to Plaintiff, as the nonmoving party, and assume Plaintiff's factual allegations to be true. See Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).

[7] In recommending that Plaintiff's Claim I, regarding a refund claim pursuant to 26 U.S.C. § 1341 seeking a refund for a prior alleged overpayment of income taxes, be dismissed, the Magistrate Judge relied solely on the language of 26 U.S.C. § 1398(g) and case law interpreting the provision, which provides a list of tax attributes to which a bankruptcy estate automatically succeeds, According to § 1398(g):

     Estate succeeds to tax attributes of debtor. -- The estate shall

[8] The Government contends that this claim may be pursued by the debtor himself, which would render this exercise in statutory and legal analysis unnecessary. (Def.'s Resp. to Pl's Supp. Mem. at 6-7.) In so doing, the Government attempts to avoid potential liability by relying on a technicality. Such attempt, however, is disingenuous. If Plaintiff were to join the debtor as a claimant in prosecuting the § 1341 claim, the Government would likely argue that the debtor is not the real party in interest because he assigned or transferred his rights in the claim to the Trustee, thereby making the 1341 claim unenforceable. Joinder of the debtor, therefore, would be in vain.

[9] A review of the record and relevant case law indicates that Plaintiff's Claim I should not be dismissed at this point. This Court, therefore, rejects the recommendation of the Magistrate Judge with respect to Claim I and will, accordingly, deny this part of Defendant's Motion to Dismiss.

B. Defendant's Objections to Recommendation to Dismiss Claim II

[10] Defendant objects to Magistrate Judge Horn's recommendation that its Motion to Dismiss as to Claim II, for lack of subject matter jurisdiction, should be denied. Specifically, Defendant objects to the Magistrate Judge's conclusion that this case is distinguishable from cases holding that there are no equitable exceptions to the statute of limitations for filing tax refund actions, and his conclusion that, accordingly, these cases are not applicable.

[11] Defendant argues that the two-year statute of limitations on Plaintiff's claim began to run on October 18, 1993, when Plaintiff received an improper notice of disallowance of the protective refund claim from the IRS, thereby barring Plaintiff's suit after October 18, 1995, Plaintiff, however, filed a subsequent refund claim with respect to the same tax year on April 17, 1996, which was disallowed by the IRS on January 7, 1997. As articulated by this Court in its prior ruling on Defendant's first Motion to Dismiss Claim II, this second notice of disallowance is what triggered the two-year statute of limitations on Plaintiff's claim because the first disallowance was withdrawn by the IRS based on its oral representations to Plaintiff. See No. 3:97CV502V, Doc, No. 13, Aug. 17, 1999, at 14. Plaintiff filed suit on September 23, 1997. Accordingly, Plaintiff's suit was timely filed.

[12] Defendant objects to the Magistrate Judge's "mistaken characterization" of the second refund claim as perfecting the first refund claim. (Def.'s Obj. at 3.) This objection mischaracterizes the Magistrate Judge's findings. The Magistrate Judge did not interpret the first and second claims as distinct and separate claims, with the latter perfecting the prior. The first refund claim was a protective refund claim, which puts the IRS an notice that an individual believes that her taxes have been erroneously assessed and preserves the taxpayer's position. The "second" refund claim of March 22, 1996 was the second step of the process to perfect a taxpayer's refund claim. See United States v. Kales, 314 U.S. 186, 194 (1941). The filing of the perfected claim was possible because the first notice of disallowance was withdrawn as improper. The amendment was, therefore, permissible because the claim was not disallowed until the notice of disallowance on January 7, 1997.

[13] Defendant also objects to the Magistrate Judge's conclusion that cases that indicate that there are no equitable exceptions to the statute of limitations for filing refund claims do not apply to this case. This objection, however, ignores the Magistrate Judge's conclusion that the triggering event was the notice of disallowance of January 7, 1997. The Court need not find an equitable, or otherwise, exception to the limitations period because Plaintiff's claim was filed within two years after the IRS rejected the administrative claim as required by 26 U.S.C. § 6532(a)(1).

[14] Accordingly, this Court finds that the Magistrate Judge's findings of fact are supported by the record and his conclusions of law are consistent with the current case law, and therefore, adopts the Magistrate Judge's recommendation to once again deny the Defendant's Motion to Dismiss Claim II.

IV. ORDER

[15] IT IS, THEREFORE, ORDERED that the Defendant's "Motion to Dismiss" as to Claim I be DENIED.

[16] IT IS FURTHER ORDERED that the Defendants "Motion to Dismiss' as to Claim II be DENIED.

[17] THIS the 30th day of October, 2001.

                                   Richard L. Voorhees