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AFAB v. Town of Old Orchard Beach
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	2001 ME 128
Docket:	Yor-01-6
Submitted
on Briefs:	May 29, 2001
Decided:	August 1, 2001

Panel:WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and
CALKINS, JJ.
Majority:	WATHEN, C.J., and RUDMAN, DANA, and CALKINS, JJ.
Dissent:		CLIFFORD, SAUFLEY, and ALEXANDER, JJ.

A.F.A.B., INC.

v.

TOWN OF OLD ORCHARD BEACH

DANA, J.
	[¶1]  A.F.A.B., Inc. appeals from the judgment of the Superior Court
(York County, Fritzsche, J.) granting in part and denying in part its motion
for reissuance of a writ of execution.  AFAB contends the court erred in
reducing the writ by an amount paid by the Town of Old Orchard Beach to
the Internal Revenue Service, and in failing to allow certain post-judgment
interest.  We affirm in part, and vacate in part.

I.  BACKGROUND

	[¶2]  This is the fourth time this case has been before us.  We have set
out the facts in prior opinions in this same action, A.F.A.B., Inc. v. Town of
Old Orchard Beach, 610 A.2d 747 (Me. 1992) (AFAB I); A.F.A.B., Inc. v. Town
of Old Orchard Beach, 639 A.2d 103 (Me. 1994) (AFAB II); A.F.A.B., Inc. v.
Town of Old Orchard Beach, 657 A.2d 323 (Me. 1995) (AFAB III), and will
repeat the facts only to the extent necessary to address the discrete issues
raised on this appeal.
	[¶3]  In 1989, "A.F.A.B. Inc., d/b/a A.F.A.B. Construction" filed a
complaint alleging breach of contract and unjust enrichment.  This dispute
arose out of a 1988 contract entered into by "Timothy Swenson d/b/a
A.F.A.B. Construction, later incorporated as A.F.A.B. Inc." to perform repairs
and renovations at the Ballpark in Old Orchard Beach.  AFAB completed its
work but was never fully compensated.
	[¶4]  On June 8, 1995, following AFAB III, a writ of execution issued
stating "A.F.A.B. Inc. d/b/a A.F.A.B. Construction" recovered a judgment in
the amount of $51,652.23 against the Town.{1}  On September 20, 1995,
before it paid the judgment, the Town received two notices of levy from the
IRS indicating that "Timothy Swenson" and "Timothy Swenson AFAB
Construction" owed a total of $36,807.76 in unpaid taxes.  Six days later the
Town paid this amount to the IRS.
	[¶5]  On that same date, the Town wrote a letter to counsel for AFAB
stating that "[u]nder federal law, the Town is obligated to pay these amounts
to the Internal Revenue Service, notwithstanding that the taxpayer may have
a dispute with the IRS over the amounts due."  The Town further stated that
it would write a check for $14,844.47, the remaining amount due to AFAB, if
AFAB signed a release "acknowledging that the judgment has been satisfied
in full by the Town's payment to the IRS and payment to AFAB."  AFAB did
not sign a release, and the Town did not pay the balance of the judgment to
AFAB.
	[¶6]  By August 30, 2000, AFAB, not having received any payment, filed
a motion for reissuance of the writ of execution.  The Town responded that
the writ must be discounted by the amount it paid to the IRS, and that post-
judgment interest accrued after its September 26, 1995 offer of payment
should be waived.  After hearing, the Superior Court issued an order on
December 18, 2000 that:  "A writ of execution may reissue in the amount of
$14,854.47.  This amount reflects the payment of the Internal Revenue
Service liens."

II.  DISCUSSION

A.  Federal Tax Levy
	[¶7]  The Internal Revenue Code provides for the collection of unpaid
taxes by administrative levy.  26 U.S.C.A. §§ 6331-6344 (1989 & Supp.
2001).{2}  This "expeditious administrative levy process," Farr v. United
States, 990 F.2d 451, 455 (9th Cir. 1993), allows the IRS to collect
delinquent taxes without judicial intervention, Kane v. Capital Guardian
Trust Co., 145 F.3d 1218, 1221 (10th Cir. 1998).  See also United States v.
Nat'l Bank of Commerce, 472 U.S. 713, 720 (1985).  Section 6332 requires
any person in possession of property on which a levy has been made to
surrender it upon demand to the IRS.  26 U.S.C.A. § 6332(a) (Supp. 2001). 
Only two defenses are available for a party who fails to comply with a tax levy: 
(1) a claim that the property in possession is subject to judicial attachment
or execution, or (2) a claim that the property in possession is not the
taxpayer's property.  Nat'l Bank of Commerce, 472 U.S. at 721-22; 26
U.S.C.A. § 6332(a).
	[¶8]  The Code provides incentives to comply with notices of levy.  Any
person who fails or refuses to surrender property subject to levy is liable to
the IRS for the value of the property and an additional specified penalty if
refusal is without reasonable cause.{3}  Id. § 6332(d).  On the other hand, a
person who complies with a levy is discharged from any obligation or liability
to the taxpayer and any other person with respect to the surrendered
property.  Id. § 6332(e).  According to federal regulation, however, a person
in possession of property who mistakenly surrenders property in which the
taxpayer has no apparent interest is not immune from suit by a third person
who has an interest in the property.  26 C.F.R. § 301.6332-1(c)(2) (2000).{4}
	[¶9]  The appropriate remedy for one who believes a notice of levy to
be wrongful is to surrender the property and bring an action against the
federal government.  State Bank of Fraser v. United States, 861 F.2d 954,
961 n.6 (6th Cir. 1988).  "[T]axpayers and third parties who have an interest
in property surrendered in response to a levy may secure from the Internal
Revenue Service the administrative relief provided for in section 6343(b) or
may bring suit to recover the property under section 7426."{5}  26 C.F.R.
§ 301.6332-1(c)(3) (2000).
	[¶10]  In compliance with section 6332, the Town surrendered
money to the IRS on receipt of the notices of levy.  AFAB argues that because
there is a judgment in favor of "A.F.A.B. Inc. d/b/a A.F.A.B. Construction," and
the notices of levy name "Timothy Swenson" and "Timothy Swenson AFAB
Construction" as the delinquent taxpayers, the Town did not possess
property of the taxpayers and was not required to surrender the property.{6} 
Even assuming that the Town surrendered corporate property of A.F.A.B.,
Inc. for individual tax liabilities of Swenson, the appropriate remedy is
administrative or legal relief against the IRS.  Pursuant to section 6332, the
Town was relieved of its obligation with respect to the surrendered money,
and the court did not err in reducing the writ by the amount paid to the
IRS.
B.  Post-Judgment Interest
	[¶11]  Title 14 M.R.S.A. § 1602-A (Supp. 2000){7} controls
post-judgment interest.  "We review the trial court's construction of the
post-judgment interest statute for errors of law.  Because statutory
construction is a matter of law, we review decisions regarding the meaning
of a statute de novo."  Austin v. Austin, 2000 ME 61, ¶ 8, 748 A.2d 996,
999-1000.
	[¶12]  "Post-judgment interest is an enforcement tool to ensure that,
once litigants have successfully invoked the power of the courts, the award
of just compensation will not be diminished by delay in payment." 
Moholland v. Empire Fire & Marine Ins. Co., 2000 ME 26, ¶ 7, 746 A.2d
362, 365.  "Section 1602-A permits the levying of post-judgment interest
on the nonprevailing party 'from and after the date of entry on an order of
judgment.'"  Austin, 2000 ME 61, ¶ 9, 748 A.2d at 1000 (quoting section
1602-A).  This section also "grants the trial court discretion to waive some
or all of the post-judgment interest upon presentation of a petition [by the
nonprevailing party] and on a showing of good cause."  Id. ¶ 10, 748 A.2d at
1000.
	[¶13]  The court exceeded the bounds of its discretion by waiving
post-judgment interest from September 26, 1995 to the present.  AFAB
completed the Ballpark repairs and renovations in 1988, and a judgment
and writ of execution in favor of AFAB issued in June 1995.  Although the
Town promptly surrendered a portion of the judgment to the IRS in 1995,
it has never paid any amount to AFAB.  Further, the Town's offer to pay the
remaining portion of the judgment if AFAB signed a release does not
demonstrate good cause as the Town cannot condition payment of a
judgment without the consent of the court.  Given the Town's history of
nonpayment, without post-judgment interest AFAB may not ever receive the
money to which it is legally entitled.
	The entry is:

Judgment reducing amount of writ of execution
affirmed; judgment denying post-judgment interest
vacated.  Remanded to the Superior Court for
calculation of post-judgment interest on $14,844.47
from September 26, 1995 to date.

SAUFLEY, J., with whom CLIFFORD and ALEXANDER, JJ., join, dissenting.

	[¶14]  I concur in the Court's analysis and conclusions with one
exception.  I do not agree with the Court's conclusion that the trial court
exceeded the bounds of its discretion when it waived post-judgment
interest.  Thus, I must respectfully dissent to part B of the Court's opinion.
	[¶15]  As the Court has accurately noted, post-judgment interest was
created by the Legislature as an "enforcement tool" to provide motivation
for the party ordered to pay over monies to do so promptly.  There is no
question that by delaying payment over time, the responsible party may
succeed in diminishing the value of the successful party's award.  The
Legislature has, however, also authorized the trial court to waive the
payment of post-judgment interest in whole or in part in instances where
the nonprevailing party demonstrates good cause for that waiver. 
14 M.R.S.A. § 1602-A.
	[¶16]  In the matter before us, the nonprevailing party did just that.  It
petitioned the court for a waiver of post-judgment interest.  In support of
that petition, the Town asserted that it had offered "complete satisfaction"
to the plaintiff, and the plaintiff refused to accept that satisfaction.  The
Court has today concluded that the trial court exceeded the parameters of
its discretion when it determined that the Town's offer of complete
satisfaction, accompanied by a request that A.F.A.B. sign a release, does not
demonstrate good cause.
	[¶17]  On the unusual facts of this case, I would defer to the exercise
of the sound discretion of the trial judge on the question of good cause. We
have made it clear that in those instances when a court is authorized to act
upon its discretion, a decision either way may be affirmed if the court
correctly understood the facts and law relevant to the exercise of that
discretion.  See Boit v. Brookstone Co., Inc., 641 A.2d 864, 865 (Me. 1994). 
A court that is called upon to exercise its discretion must understand the
factors and the law material to its decision, and must weigh the factors
accordingly.  We have consistently deferred to the court's ability to give
weight to the appropriate factors and have found abuse only where the court
has made a "serious mistake" in weighing those factors.  See West Point-
Pepperell, Inc. v. State Tax Assessor, 1997 ME 58, ¶ 7, 691 A.2d 1211,
1213 (quoting Coon v. Grenier, 867 F.2d 73, 78 (1st Cir. 1989) (citation
omitted)).
	[¶18]  No such serious mistake is present here.  The record before the
trial court chronicled a tale of extensive litigation.  The litigation in this
matter began in 1989.  This is the fourth time that this case has been before
us.  The Town's desire to avoid further expense and litigation through a
release was neither unreasonable nor unfounded.  There is no dispute that
the Town did, in fact, pay $36,807.76 to the federal government on the IRS
lien and did, in fact, offer to pay to A.F.A.B. the entire remaining amount due
so long as the A.F.A.B. signed a release acknowledging that the judgment it
had obtained had been satisfied.  Almost five years later, A.F.A.B. filed a
petition for reissuance of the writ of execution.  As the court has today
concluded, the Town's tender of the remaining $14,844.47 to A.F.A.B. in
1995 represented a tender of the entire amount due to A.F.A.B. at that time. 
Thus, the legislative policy of providing a disincentive for delay of payment is
not called into play here.  A.F.A.B. chose not to accept the amount tendered
and apparently chose not to take any further action for several years.  On
these facts, the court's determination that good cause existed for waiving
post-judgment interest cannot be seen to exceed the bounds of its
discretion.{8}  I would affirm the trial court's decision not to award post-
judgment interest.

Attorney for the plaintiff:
Neal L. Weinstein, Esq.
32 Saco Ave.
P.O. Box 660 
Old Orchard Beach, Maine 04064-0660

Attorney for the defendant:

Gregory M. Cunningham, Esq.
Bernstein, Shur, Sawyer & Nelson
100 Middle St., West Tower
P.O. Box 9729
Portland, Maine 04104