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Taxed to the breaking point: negligence, emotional harm…and the IRS?

Scales of Justice - Charlotte Law Books

I. Emotional Distress

There have been major legal breakthroughs in the last 30 years of personal injury and negligence recovery. Among these milestones in North Carolina has been the drive by personal injury attorneys to lay a foundation for proving mental distress and anguish in more types of cases.

When it comes to genuine fear and trauma, there are probably few letters in the alphabet that summon more fear and anguish than I-R-S. But can there also be any legal instances, where a third party’s causing a problem with the IRS, may in turn create a claim of negligence or personal injury? In an interesting case involving a couple going through the trauma of a breakup, that question actually reached all the way to the North Carolina Supreme Court, largely through the work of an experienced and very talented personal injury attorney. It involved the aftermath of a divorce and property settlement.

As if the divorce was not enough, these two parties also had the unfortunate circumstance of having the IRS file a lien against the home…which had been awarded to the wife in the divorce action. Because the specific seizure occurred as a result of the IRS disallowing her claim of deducting fees paid during her divorce, the court considered the possibility that the negligence of the husband in meeting his obligations, as agreed to, were the direct cause of everything that happened afterwards. The court allowed a suit by the wife against the husband. That itself was a major victory by the woman’s personal injury attorney.

II. Seized and Humiliated

In attempting to seize the woman’s house, the IRS posted a formal and large notice of seizure on her front door: which was plainly visible to any passersby, such as neighbors and visitors, or the general public. In the same way, the IRS widely published an intended notice of sale of the home. The local media noted the story at some point.

In order to stop the IRS seizure, Mrs. S. had to take out an emergency, high interest private loan on her home. Ultimately, the personal injury attorney noted, it was impossible to meet the terms of that deed of trust, and foreclosure began.

 “Great embarrassment, humiliation, and degradation…

…in the eyes of her friends and the public.”

III.  Contracts and Emotions Don’t Mix ... Except For

The personal injury attorney in this case acknowledged that contract actions generally didn’t give enough reason to find a cause for emotional distress. Yet, the reason this case reached the North Carolina Supreme Court was because of the strength of the particular facts, presented by the personal injury attorney. This level of familiarity with a case is why people need to talk with a personal injury attorney as soon as possible…once a person senses that they have suffered a type of personal injury from a specific event. The more time that passes, the more likely the facts of a case will be lost or confused. This is often especially the case with cases involving trauma as a personal injury.

Let’s take a look at the general rules of why emotional injuries generally aren’t found in contract actions. Then, we’re going to look at why this particular personal injury attorney was so effective in describing why this case might have fit into an exception to that general rule.

              A. The general rule about no contracting for anguish:

Almost all contracts relate to agreements that are commercial or called “pecuniary.” This means that they touch and concern property or services that are somehow tied in with business, or even a professional relationship. These types of contracts, the personal injury attorney in this case conceded, meant that the bottom line was the bottom line…that mental anguish was not usually as important as pecuniary interests between a divorcing couple. In the same way, courts in North Carolina typically regarded anguish damages as needing a direct tie to a contract, and not being “remote” from what the parties intended to accomplish or to reasonably anticipate.

                  B. The important types of exceptions:

If the general rule is fairly standard, that contracts are not going to allow damages for mental anguish, then the exception would seem to have very little room. In fact, however, an experienced personal injury attorney can delve somewhat deeply into the reasons for the contract and what the parties intended. This research could mean that the contract reflects something that’s personal in nature between the parties. There could be some aspect of personal trust or breach of trust. Similarly, an exception can be found where the mental concern or even “solicitude” between the parties is so well evidenced by the very nature of the contract, that suffering would be a natural result of any breach of the contract. The question is whether or not the parties can be said to have somehow made a payment to contract for this emotional safety, as an expected result. One very common example to help illustrate this point, used in this case by the personal injury attorney, was a burial contract. As the North Carolina Supreme Court agreed, there are a very few feelings so associated with the human heart as dealing with someone’s passing away. The expectation that someone’s funeral arrangements, especially if the arrangements result in a horrible mistake, would be thought to include mental or emotional concerns is good sense. Was a similar foreseeable expectation present in the IRS induced “trauma”?    

Conclusions:   

The NC Supreme Court was clearly impressed with the approach of the personal injury attorney in this case. Ultimately, however, the wife did not prevail on this particular set of facts. The most important issue was that the court judges felt there had been not been a specific agreement concerning any economic loss because of the disallowed IRS ruling, let alone foreseeing a property seizure. These facts, the judges ruled, specifically distinguished the claim for emotional harm from other mental anguish damages.

One notable takeaway is that the court implied that under slightly different circumstances, a case for emotional damages or anguish for breach of contract could be allowed. The result of this interpretation suggests that the relationship may be crucial. There has to be a valid contract, but the overriding personal relationship between the parties may be a key factor in claiming contract anguish/injury or trauma. This possibility is another reason that anyone involved in an intimate relationship, who feels that they have been harmed emotionally by virtue of a broken agreement, should immediately seek the help of a qualified personal injury attorney. At some point, it’s very possible that eventually, contract claims will more generally allow recovery for traumatic damages. Additionally, the breach of a contract itself can have other negligence issues, in addition to trauma.

A common chant of childhood, decades ago, was “sticks and stones may break my bones, but words will never hurt me.” As we’ve been talking about in this article, the emotional anguish or harm that occurs after an injury or a negligence action by another person, can indeed cause more harm than a “broken bone.” These unseen traumas and incidents are now more commonly backed up by medical evidence. This real medical evidence is increasingly accepted by juries and proven by professionals such as a qualified personal injury attorney.

If you, a family member or a loved one have been hurt in a contractual, counseling, medical or health care setting—or have questions about anguish or pain and suffering claims, or need help related to a range of damages, please contact us.  You will speak with a personal injury attorney who can best answer your questions.  There is never a fee for this initial consultation.

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