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Saucier v. State Tax Assessor
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	1998 ME 61
Docket:	Aro-97-538
on Briefs:	March 9, 1998
Decided:	March 25, 1998



	[¶1]  Maynard Saucier appeals from the judgment of the Superior
Court (Aroostook County, Pierson, J.) dismissing his petition for review of
final agency action pursuant to M.R. Civ. P. 37 for failure to comply with the
court's order compelling discovery.  Saucier contends that his action was
stayed by his filing a bankruptcy petition or, in the alternative, that the
court's sanction of dismissal exceeded the bounds of its discretion.  We
conclude that the circumstances do not warrant dismissal and accordingly
vacate the judgment.  
	[¶2]  On December 4, 1994, the State Tax Assessor issued a transfer
assessment against Maynard Saucier for certain trust fund taxes, plus
interest and penalties, owed by W.H. Ouellette, Inc.  The trust fund consists
of sales taxes collected by W.H. Ouellette, Inc.{1}  Saucier requested
reconsideration of the assessment, and following an informal conference,the Assessor upheld the transfer assessment.  Pursuant to 36 M.R.S.A. § 151
(Supp. 1997), Saucier filed a complaint seeking review of final agency action
in the Superior Court.  
	[¶3]  On April 14, 1997, the Assessor served a set of interrogatories
and a request for production of documents upon Saucier.  When Saucier
failed to respond to the requested discovery, the Assessor obtained an order
compelling Saucier to provide the requested discovery.  The order
compelling discovery was entered on June 6, 1997, and allowed Saucier
fifteen days to comply with the discovery request.  Saucier did not respond
to the order compelling discovery, but filed a petition for liquidation under
Chapter 7 of the United States Bankruptcy Code on June 20, 1997, one day
before the compelled discovery was due.  Saucier notified the court of the
bankruptcy filing by a letter dated June 25, 1997, that reflected his
understanding that "all proceedings are stayed pursuant to the provisions of
the Bankruptcy Act."  On July 1, 1997, the Assessor filed a motion to
dismiss Saucier's complaint pursuant to M.R. Civ. P. 37(b)(2)(C) based on
Saucier's failure to comply with discovery.{2}  The court granted the motion,
and this appeal followed.  
	[¶4]  Section 362 of the Bankruptcy Code provides in pertinent part:

	(a) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this title ...
operates as a stay, applicable to all entities, of-

	(1)  the commencement or continuation, including
the issuance or employment of process, of a judicial,
administrative, or other action or proceeding against the
debtor that was or could have been commenced before
the commencement of the case under this title, or to
recover a claim against the debtor that arose before the
commencement of the case under this title[.]  

11 U.S.C. § 362(a)(1) (1994) (emphasis added).  The parties agree that the
proceeding at issue is a continuation of an administrative proceeding for the
purposes of the automatic stay provision of section 362(a)(1).  They
disagree, however, regarding whether the proceeding was brought by
Saucier or against him.  By the terms of the statute, the automatic stay of
proceedings applies only to actions that are "against the debtor."  There is a
split of federal authority on the issue whether a tax assessment proceeding
is "brought" by the taxing authority or the taxpayer.  In Delpit v.
Commissioner of Internal Revenue, 18 F.3d 768 (9th Cir. 1994), the court
held that "[a]n appeal from a Tax Court judgment concerning an alleged tax
deficiency on the part of the debtor is a 'continuation' of an administrative
proceeding 'against the debtor' within the meaning of the first clause of
Section 362(a)(1)."  Id. at 770.  On the other hand, in Freeman v.
Commissioner of Internal Revenue, 799 F.2d 1091 (5th Cir. 1986) (per
curiam), the court held that an identical proceeding was "initiated" by the
taxpayers filing a petition for a redetermination of their income tax liability
with the Tax Court, and therefore was initiated by the debtor, not against
the debtor.  Id. at 1093.  
	[¶5]  In this case Saucier is in a position similar to that of the debtor
in Delpit.  The underlying action in Delpits' case was a claim by the Internal
Revenue Service that the Delpits were responsible for certain tax liabilities
arising from sham accounting transactions by a holding company they
formerly owned, a claim the Delpits disputed.  Delpit, 18 F.3d at 769.  The
Freemans, however, filed a petition in the Tax Court seeking merely a
redetermination of their federal income tax liability from four years earlier. 
Freeman, 799 F.2d at 1092.  Saucier is not simply challenging the amount of
an ordinary annual tax obligation.  On the contrary, the Tax Assessor is
seeking to hold him personally responsible for the trust fund taxes owed by
a corporation.  In these circumstances, the administrative proceeding is
properly characterized as one initiated "against the debtor," and the
bankruptcy code's automatic stay provision is applicable.  
	[¶6]  Even if Saucier were not entitled to the automatic stay
provisions of section 362(a)(1), we conclude that the court's dismissal of his
action was overly harsh.  We review the trial court's decision as to the
sanction imposed for a discovery violation for an abuse of discretion. 
Employee Staffing of America, Inc. v. Travelers Ins. Co., 674 A.2d 506, 508
(Me. 1996) (citing Shaw v. Bolduc, 658 A.2d 229, 234-35 (Me. 1995)). 
Although the trial court's discretion to choose the appropriate sanction is
broad, when a court imposes a "drastic" sanction such as dismissal or
default we closely scrutinize the court's decision.  Pelletier v. Pathiraja, 519
A.2d 187, 190 (Me. 1986).  
	[¶7]  It is true that we have affirmed dismissals based on discovery
noncompliance in several past cases.  See, e.g., Employee Staffing, 674 A.2d
at 509; Hatch v. Maine Tank Co., 666 A.2d 90, 93-94 (Me. 1995); Pelletier,
519 A.2d at 190.  The compelling facts justifying dismissal in those cases are
not present here, however.  In each of the three cases cited, the sanctioned
party had repeated opportunities to comply with the requested discovery or
was on clear notice that the action would be dismissed.  Saucier is not
blameless-he failed to provide the requested discovery within 30 days as
required pursuant to M.R. Civ. P. 33 and 34.  The record is silent as to
whether he was prepared to comply with the court's order compelling
discovery within the additional fifteen days provided by the court.  He did
file his petition in bankruptcy during that 15-day period before the
conclusion of the compelled discovery period, however, and had a good faith
and legally justifiable basis for believing that the Superior Court proceeding
would be stayed.  The law governing the applicability of the automatic stay
provisions of the Bankruptcy Code in a case such as this is far from settled,
and we conclude therefore that Saucier should not have been subject to the
drastic sanction of dismissal.  
	The entry is:
				Judgment vacated.  Remanded for
				further proceedings consistent
				with the opinion herein. 

Attorney for plaintiff: William J. Smith, Esq. 55 Main Street Van Buren, ME 04785 Attorneys for defendant: Andrew Ketterer, Attorney General Stanley W. Piecuch, Asst. Atty. Gen. 6 State House Station Augusta, ME 04333-0006
FOOTNOTES******************************** {1}. Pursuant to 36 M.R.S.A. § 177(1) (Supp. 1997), an individual may be held personally responsible for the payment of trust fund taxes owed by a corporation of which he or she is an officer, director, member, agent, or employee if the individual is responsible for the control or management of the funds or finances of the corporation or is responsible for the payment of the corporation's taxes. During the period of assessment, Saucier owned 37% of W.H. Ouellette, Inc., and was its vice president, treasurer, and general manager. {2}. M.R. Civ. P. 37(b)(2)(C), which governs failure to make discovery, provides in pertinent part: (b) Failure to Comply With Order. .... (2) Sanctions by Court in Which Action is Pending. If a party ... fails to obey an order to provide or permit discovery, ... the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following: .... (C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party[.] (Emphasis added.)