*

The Honorable Algenon L. Marbley, United States District Judge for

the Southern District of Ohio, sitting by designation.

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RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2003 FED App. 0386P (6th Cir.)

File Name: 03a0386p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

v.

PATRICK M. DONOVAN,

Defendant-Appellee.

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No. 02-3260

Appeal from the United States District Court

for the Northern District of Ohio at Akron.

No. 01-01457—James Gwin, District Judge.

Submitted: June 17, 2003

Decided and Filed: October 31, 2003 

Before: BOGGS, Chief Circuit Judge; GILMAN, Circuit

Judge; and MARBLEY, District Judge.*

_________________

COUNSEL

ON BRIEF: Robert J. Branman, David English Carmack,

UNITED STATES DEPARTMENT OF JUSTICE, TAX

2 United States v. Donovan No. 02-3260

DIVISION, APPELLATE SECTION, Washington, D.C., for

Appellant. Irving Bell, Cleveland, Ohio, for Appellee.

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OPINION

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BOGGS, Chief Circuit Judge. The United States appeals

the order of summary judgment entered by the district court,

dismissing its complaint against Patrick Donovan, in which

it sought to reduce to judgment certain tax assessments. For

the following reasons, we reverse and remand to the district

court so that it may enter summary judgment in favor of the

government. 

I

Donovan was a responsible officer at J.A. Clark

Mechanical, Inc. (“Clark”) during 1985 and 1986. Clark

failed to pay certain employment tax liabilities that were

withheld from employees’ wages. The IRS determined that

Donovan was a person responsible for Clark’s failure to pay

the withheld taxes, and that he willfully allowed other

creditors to be paid ahead of the government. The IRS made

an assessment against Donovan “for unpaid tax liabilities for

trust fund related penalties,” pursuant to I.R.C. § 6672. The

assessment was made on March 16, 1989 in the amount of

$154,570.13. 

The government had ten years after assessment to bring suit

to collect the tax liability, unless an exception to the ten-year

statute of limitations existed. I.R.C. § 6502(a)(1). The statute

of limitations could be extended by an agreement in writing

by the IRS and Donovan before the expiration of the ten-year

limit. I.R.C. § 6502(a)(2). Several months prior to March 16,

1999, the date the statute of limitations would expire,

Donovan made the IRS an offer in compromise on IRS Form
No. 02-3260 United States v. Donovan 3

656. Form 656 contains an explicit agreement by which the

statute of limitations is extended.

On April 18, 2000, Donovan sent the IRS a withdrawal of

his offer in compromise. The IRS sent a return letter, dated

April 28, 2000, acknowledging the withdrawal of the offer,

stating that “[y]our offer is considered withdrawn as of

04/18/00.” 

On June 13, 2001, the government filed this suit. The total

amount due as of May 18, 2001 was $466,936.21. Donovan

filed a motion for summary judgment, arguing that the suit

was barred by the statute of limitations. The district court

entered summary judgment in favor of Donovan. 

The dispute centers on when the statute of limitations began

to run again: (1) on April 18, 2000, the date Donovan faxed

his letter withdrawing the offer, and the date the return letter

indicated that his offer was considered withdrawn; or

(2) April 28, 2000, the date the IRS acknowledged the

withdrawal in writing. Donovan argues that the period the

offer was pending ended on April 18, which would cause the

statute of limitations to expire on June 4, 2001. The

government argues that the period the offer was pending

expired on April 28, 2000, and that the statute of limitations

ended on June 14, 2001. 

The district court stated in its opinion that Form 656 was a

contract, and thus had to be interpreted under contract law. It

found that the terms were clear and unambiguous, and that

there were no issues of fact to be determined. The court went

on to state that the contract’s interpretation required the court

to discern the parties’ intent. It concluded that the intent of

the parties was to interpret the agreement terms to comport

with the IRS’s standard practice, as the agreement was on an

IRS standard form. The court concluded that IRS’s standard

practice was to consider the withdrawal of a settlement offer

effective as of the date the taxpayer wrote his letter of

withdrawal. Therefore the suit was untimely and summary

4 United States v. Donovan No. 02-3260

judgment in favor of Donovan was proper. The government

timely appealed. 

II

Summary judgment is appropriate when the evidence

submitted shows “that there is no genuine issue as to any

material fact and that the moving party is entitled to a

judgment as a matter of law.” Fed. R. Civ. P. 56(c). The

district court correctly concluded that no genuine issues of

material fact remained, but that the sole question at issue was

a question of law: when the statute of limitations began to

run. This court reviews the grant of summary judgment de

novo, using the same standard as the district court. Cornist v.

B.J.T. Auto Sales, Inc., 272 F.3d 322, 326 (6th Cir. 2001).

The offer in compromise was memorialized on IRS Form

656. Form 656 contains several provisions relevant to this

appeal. Item 8 outlines the conditions to which Donovan

agreed by submitting the offer. Paragraph (e) of that item

reads: “I/we waive and agree to the suspension of any

statutory periods of limitation (time limits provided for by

law) for IRS assessment and collection of the tax liability for

the tax periods identified in item (5).” Paragraph (m) reads:

“The offer is pending starting with the date an authorized IRS

official signs this form and accepts my/our waiver of the

statutory periods of limitation. The offer remains pending

until an authorized IRS official accepts, rejects or

acknowledges withdrawal of the offer in writing.” The

immediately following paragraph, paragraph (n), reads: “The

waiver and suspension of any statutory periods of limitation

for assessment and collection of the amount of the tax liability

described in item (5), continues to apply: while the offer is

pending (see (m) above) . . . and for one additional year

beyond each of the time periods identified in this paragraph.”

The government argues that the offer in compromise was

“pending” until the withdrawal was acknowledged, and the

exact language of the acknowledgment letter does not affect
No. 02-3260 United States v. Donovan 5

the form waiving the statute of limitations. It cites the

language of paragraph (m), which reads: “The offer remains

pending until an authorized IRS official . . . acknowledges

withdrawal of the offer in writing.” It argues that some

affirmative action by the government, accepting the offer,

rejecting the offer, or acknowledging its withdrawal, is

required in order to set the statue of limitations running again.

The government argues that the form letter sent to Donovan

contains the effective withdrawal date merely to indicate that

the government can no longer accept the offer in compromise,

and that this has nothing to do with when the statute of

limitations begins to run again. 

The question of whether the language of an agreement is

ambiguous is a question of law. Parret v. Am. Ship Bldg. Co.,

990 F.2d 854, 858 (6th Cir. 1993). Once the language of a

contract has been held to be ambiguous, the interpretation of

such language is a question of fact that turns on the intent of

the parties. Ibid. A court, however, may not use extrinsic

evidence to create an ambiguity; the ambiguity must be

“apparent on the face of the contract.” Schachner v. Blue

Cross and Blue Shield of Ohio, 77 F.3d 889, 893 (6th Cir.

1996). 

The district court first found that the terms of the contract

were clear and unambiguous. Having done so, it was error for

it to go on and attempt to discern the intent of the parties.

The intent of the parties is best determined by the plain

language of the contract. United States v. Hodgekins, 28 F.3d

610, 614 (7th Cir. 1994) (holding that extension of the statute

of limitations on IRS Form 2750 is given effect in accordance

with its plain meaning). 

While we recognize that Form 656 could have been more

clearly drafted, and perhaps should be, the key language of

Form 656 – that the “offer remains pending until an

authorized IRS official . . . acknowledges the withdrawal of

the offer in writing” – is unambiguous on its face. The IRS

acknowledgment letter itself does not contradict the plain

6 United States v. Donovan No. 02-3260

terms of Form 656. We find persuasive the government’s

argument that the date of the effective withdrawal of the offer

is a different matter from that of the date when the offer is no

longer “pending” pursuant to paragraph (m). It may indeed

be true, as the district court states, that “the withdrawal of an

offer in compromise is effective as of the date the taxpayer

writes his letter of withdrawal.” That judgment, however,

would be true as a matter of substantive contract law. See

Restatement (Second) of Contracts § 42 (1981). However,

the statute of limitations question turns on when the offer

ceases to be “pending” under paragraph (m) of Form 656.

The latter controls when the statute of limitations begins to

run again. 

An objection could be made that the government could

control and manipulate the statute of limitations simply by

failing to acknowledge the withdrawal of an offer. That

argument, which we do not address here, could arise in a

future case if there appeared to be a factual basis for it. Here,

however, the government cannot possibly be charged with

unreasonable delay in sending an acknowledgment of the

withdrawal seven business days after receiving a letter

withdrawing the offer in compromise. 

The district court erred in granting summary judgment to

Donovan. The statute of limitations began to run again on

April 28, 2000, the date of the acknowledgment in writing of

the withdrawal of the offer in compromise. The suit is not

untimely.

III

For all of the reasons set forth above, we REVERSE and

REMAND to the district court with instructions to enter

summary judgment in favor of the government.