H. Richard Shutts, Petitioner

T .C .` .Memo . 2010-16 0

UNITED STATES TAX COURT

H . RICHARD SHUTTS, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No . 6322-04 . Filed July 26, 2010 .

On Mar . 22, 2005, P and R reached a basis of settlement in a deficiency case . Two days later .; P filed for bankruptcy : On Apr . 12, 2005, during the' pendency of the bankruptcy action, this Court entered decision pursuant to the parties' agreement . R now files a motion for leave to file a motion to vacate and' lodges a motion to vacate . P objects to the granting of the motion .

Held : The Apr . 12, 2005 decision is void because it was entered in violation of the automatic stay of 1 1 :U .S .C . sec . 362(a)(8) (2000) . R's motion for leave and R's motion to vacate shall bothbe granted .

H . Richard Shutts, . pro se .

Lisa M . Oshiro , for respondent .

SERVED Jul 26 2010 2 -

MEMORANDUM OPINIO N

ARMEN, Special Trial Judge : This matter is before the Court on respondent's motion for leave to file a motion under Rule 162 to vacate the stipulated decision entered on April 12, 2005, and .now final under section 7481(a)(1) .1 At issue is whether th e Court lacked jurisdiction to enter the stipulated decision because petitioner had filed a petition in bankruptcy on March 24, 2005, giving rise to the automatic stay imposed by 11 U .S .C .

section 362(a)(8) (2000) .

Background Petitioner resided in the State of Idaho when the petition was filed. on April 12, 2004 .

On March 22, 2005, petitioner and respondent's Appeals Office reached a basis of settlement . Thereafter, petitioner's then-attorney and counsel for respondent signed the stipulated decision, which decision was entered by the Court on April 12, 2005 .

On March 24, 2005, just 2 days after the basis of settlemen t had been reached, but before the, stipulated decision had been signed by counsel for the parties and entered by the Court, petitioner filed a petition in bankruptcy under chapter 7 of the .

_ 3 - Bankruptcy Code .2 'The bankruptcy' court issued a discharge o n July 13, 2005 .

As stated =above, respondent- filed-the Motion (cid:127)For .-Leave To- File Respondent's` Motion To Vacate Decision Out Of Time on February 26, 2010 . On-that same day respondent also lodged a Motion To Vacate Decision .

' In response to an Order of the-Court dated March 8, 20 .10, petitioner filed an Objection to,respondent's motion for leave o n April 7, 2010 .' Petitioner concurrently has .a .case pending before the"Court that is,the :collection :action'that-commenced upon entry of the decision in the present case . Petitioner objects to the granting of the . motion for- leave- in this case ` on. the grounds-that the motion was filed in the wrong action and that resolution of the collection case would render the motion moot ;:

Discussion , Respondentdesires to file a motion to vacatethe-stipulated- decision entered on April 12, . .2005 . Because neither party file d a notice of appeal or a timely motion tot .vacate or . revise (cid:127)` tha t decision, it became final on July 11,°2005 . ; . 90 days after it was ,entered . See secs . 7459(c), -7481,(a) (1), .

4 - Rule 162 provides that a party seeking to vacate a decision must file an appropriate motion within 30 days after . the decision is entered,` unless the Court allows otherwise . Because respondent did not file his motion to vacate within the 30-day period, respondent has requested leave from the Court to file that motion at this time .

The disposition of a motion for leave to file a motion to vacate or revise,a decision .lies within the'sound discretion of the Court . See Heim v . Commissioner , 872 F . .2d 245, 246 (8th Cir .

1989) ; affg . T .C . Memo . 1987-1 ; see also Toscano v . Commissioner , 441 F .2d 930, 938 (9th Cir . 1991 ).(Byrne, J ., dissenting) , vacating 52 T .C . 295 (1 .969) ; Commissioner v . Estate of Long , 304 F .2d 136, 144 (9th Cir . 1962) . Where a party legitimately challenges the jurisdiction of this Court, however, the Court should freely exercise that discretion, notwithstanding the time of the challenge and even if the decision under attack is ., otherwise final . See_ Brannon's of Shawnee, Inc . v . Commissioner ,

The Court has jurisdiction to vacate a decision that is void, Abeles v . Commissioner , 90 T .C . 103, 105-106 (1988), which naturally means that the Court also has jurisdiction to grant a motion for leave to file a motion to vacate a void decision, Adkins v . Commissioner , T .C . Memo . 2005-260 . Under the present setting, we shall grant=respondent's motion for leave : to fil e respondent's motion to vacate .

We now turn to respondent ' s; motion to vacate . Once a decision ' of this Court becomes final , we may vacate the decision only in certain narrowly - circumscribed situations .

See= Helverin g . v . N . Coal Co ., 293 U .S .-191 (1934) ;' Drobny v Commissioner °,`113 F .3d 670, 67 7 (7th Cir ."1997 )-, affg .- T .C .'Memo . = 1995-209 ; Curtis v . Commissioner , T .C . Memo . 1996 .= 371 : The Courts of Appeals hav e consistently held that .the Tax Court lacks the authority t o vacate or revise an otherwise final deciision on grounds such a s newly- discovered evidence or excusable neglect .

Abatti v .

Commissioner , 859 -F . 2d` 115, 117-118 (9th Cir .=- 1988) , affg . - 86 T .C . 1319 (1986) . The Courts .of';Appeals have generally allowe d an exception to the usual rule of finality of section 7481 fo r fraud on the Court .

Id . ' at '118 : -In addition, the Courts o f Appeals, and in particular the Court of Appeals for the Nint h Circuit, the court to which this case is appealable , has hel d that the Tax Court may vacate ,a final decision if that decisio n is shown to be void, or a, legal nullity, , for lack . of jurisdiction over the subject matter . .

Billingsley v . Commissioner , 868 F .2d 1081 (9th Cir . 1989 ) ; see also Roberts v . Commissioner. , 175 F .3 d 889, 892 n .3 (11th Cir . 1999) .

d In the present case, respondent contends that . the decision entered on April 12, 2005, is void because it was entered in violation of the automatic stay of 11 U .S .C . section 362(a)(8) .

A bankruptcy filing generally triggers an automatic stay of Tax Court proceedings concerning the debtor . Actions that are subject to ;;the automatic stay are set forth in 11 U .S .C . section 362(a) . At the time petitioner filed for bankruptcy, 11 U .S .C .

section .362(a) provided in relevant part :

362 ., Automatic sta y .(a) Except as provided in subsection (b) of this .. - section, a petition filed under section 301, 302, or 303 of this title, or an application filed unde r section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as ,a stay, . applicable to all entities of-- (8) the . commencement or continuation of,a proceeding before the United States Tax Court 1 3 1 concerning the debtor .

The automatic stay generally operates to temporarily ba r actions against or concerning the debtor or property of th e

Y debtor . or the bankruptcy estate .'

Allison v . Commissioner , 97 T .C . 544, 545 (1991) . In a chapter 7 bankruptcy, such as that o f .petitioner, and as applicable here,an automatic stay is generally lifted only at "the time a discharge is . granted or denied ." 11 U .S .C . sec . 362(c) (2) (C) (2000) .

The Court of Appeals for the Ninth Circuit has stated that actions in violation of the automatic stay are void .and not merely voidable .

Schwartz v . United States , 954 F .2d 569, 571 (9th Cir . 1992) ; see also Stringer v . Huet , 847 F .2d549, 551 (9th Cir . 1988) . One of those actions is the "continuation of a proceeding before the United States Tax Court concerning the debtor" . 11 U .S .C . sec . 362(a)(8) (2000) .

Petitioner filed his Tax Court petition on April 12, 2004 .

On March 24, 2005, petitioner filed a petition in bankruptcy, which temporarily barred the continuation of petitioner's pending Tax Court case . See 11 U .S .C . sec . 362(a)(8) . Petitioner was granted a discharge on July 13, 2005, bringing to an end the automatic stay . See id . sec . 362(c)(2)(C) . But the stipulated decision was entered on April 12, 2005, during the period of time that the automatic stay was in effect . Thus, the entering of the decision violated the automatic stay, and that decision is, therefore, void . Given that the stipulated decision is void, w e shall grant respondent's motion to vacate the decision .

8 - Conclusio n e Finally, in reaching the conclusions described herein, we have considered all arguments made by petitioner, and, to the extent notq,mentioned above, we find them to be moot, irrelevant, or without merit .

To reflect the foregoing, An appropriate order wil l be issued .

1. Unless otherwise indicated, all section references are to the .Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure .
2. Presumably, neither petitioner's tax counsel nor . counsel for respondent was aware of the bankruptcy"filing at the time that the stipulated decision was entered . The Court was first advised of that matter by respondent upon .the filing of his motion for leave .
3. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub . L . 109-8, sec . 709, 119 Stat . 127, amended sec . 362(a)(8) of .the Bankruptcy Code by striking out "the debtor" and . inserting "a corporate debtor's tax liability for a taxable period the bankruptcy court may determine, or concerning the tax liability of a debtor who is an individual fora taxable period ending before the date of the order for relief under this title" . This provision became effective with respect to petitions for relief under the Bankruptcy Code filed on or after Oct . 17, .2005. See id . sec . 1501, 119 Stat . 216 . Because petitioner filed his bankruptcy case on Mar . 24, 2005, this amendment does not apply here .
69. T .C .-999, 1002 (1978) .