* The Honorable Algenon L. Marbley, Unit ed States Dist ric t Ju dge f

or the Southern Distri ct of Ohio, sit ting by designation. 1 RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Six

th Circuit Rul e 206 ELECTRO NIC CIT

ATION: 2003 FED App . 0386P (6th C ir.) File Name: 03a03 86p.06


### UNITED STATES COURT OF APPEALS

FOR THE SIXT H CIR CUIT

_________________ U NITED S TAT ES OF A MERICA , Plaintiff- Appellant ,

v.
P ATRICK M. D ONOVAN , Defendant-Appellee. X

- - - -> , - - N 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 Befor e: BOGG S, Chief Cir

cuit Judge ; GIL

MAN, Circ

uit Judge; and MARBLEY, District Judge. *

_________________ COUNSEL ON BRIE F: Robert J. Branma n, David English Carmack, UNITED STATES DEPARTMENT OF JUSTICE, TA X 2 United States v. Donovan No. 02-3260

DIVI SION, APPELLATE SECTION, Washington, D.C., for Appellant. Irving B ell, Cleveland, Ohio, for Appellee.

_________________ OPINION

_________________ BOGGS, Chief Circ

uit Judge. The Unite d States a ppeals the order of summary judg

ment entere d by

the distri ct court , dismissing its complaint against Patrick Don ova n, in which it sought to reduce to judgment certain tax assessments. For the fol lowing reasons, we reverse a nd remand to the distri c t court so that it may ent er summary judg ment in favor of the government. I Donovan was a responsible office r at J.A. Clark Mech anica l, Inc. (“Clark”) during 1985 and 1986. Clark failed to pay certain employ ment tax lia

bilitie s t hat were withheld from employee s’ wages. T he IRS determined that Donovan was a person responsible for Clark’s fa ilure to pay the withheld taxes, and that he willfully allowed other creditors to be paid

ahead of the government. The I RS made anassessment against Donovan “for unpaid tax liabilities for trust fund related penalties,” pursuant to I.R.C. § 6672. The assessment

was ma de on March 16, 1989 in the amount of $154,570.13. The government had

ten years after

assessme nt to bring suit to co ll ec t t he ta x l ia bi li ty, unless an exception to the ten-yea r statute of limitati ons existed . I.R. C. § 6502(a) (1). The statute of li mitations c ould be exte nded by an agr eement in writin g by the IRS and Donovan before the expiration of

the ten-yea

r limit. I.R.C. § 6502(a)(2). Several months prior to March 16, 1999, th e date the statute of limitations would expire, Donovan made the IRS an offer in compromise on IRS FormNo. 02-3260 United States v. Donovan 3

656. Form 656 contains an explicit agreement by which the statute of limitations is extended. OnApril18, 2000, Donovan sent the IRS a withdrawal of his offer in compromise. The I RS sent a return letter, dated April28, 2000, acknowledging the withdrawal of the offer, stating that “[y]our

offer is considered withdrawn as of 04/18/00.” OnJune 13, 2001, the government filed this suit. The total amount due as of May

18, 2001 was $466,936.21. Donovan filed a moti on for summ ary judgme nt, ar guing tha t 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 ag ain: (1) on April 1 8, 2000 , the date Donovan faxed his letter withdrawing

the offer, and

the date the return letter indicated that his of

fer was consid e red withdrawn; or (2) April 28, 2000, the date t he IRS acknowledge d the withdrawal in w riti ng. 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 wa s pending expired on April 28, 2000, and that the statute of limitations ended on June 14, 2001. The district c ourt state d in its opinion that Form656 was a contract, and thus had to be interpreted under contract law. It foundt hat the terms were clear and unambig uous, and that there were no issues of fact to be determined. The court went onto state that the contract’s interpretation required the court to discern the parties’ intent. It c oncluded that the intent of the parties was to inter

pr et the agreement terms to comport with the IRS’s standard practice, a s 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 taxpaye r wrote his letter of withdrawal. Theref

ore the s u it was untimely and summary 4 United States v. Donovan No. 02-3260 judgment in fa vor of Donovan was proper. The g overnment timely appealed. II Sum mary judgment is appropriate when the evidence submittedshows “that there i s no genuine issue as to any material fact and that the moving party is entitledt o a judgment as a matte

r of la w.” Fed. R. Civ. P. 56(c). The district c ourt correctly

concluded that no genuine issues of material fact remained, but that the sole question at issue was a questi on of law : when the statute of

limitations

began to run. This cour

t review s the gr

ant of sum

mary judgmen t 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

comp romise was memorialized on IRS Form 656. F orm 656 conta

ins sever al provis ions rele

vant to this appeal. Item 8 outlines the co ndition s to which Donovan agreed by submitting the offer

. Paragr aph (e) of that item reads: “I/we waive a

nd agree to the sus pension of any statut ory pe riods 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) rea ds: “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 . T he offer remains pending until an authorized IRS official acc ep ts, rejects or acknowledges withdrawal of the offer in writing.” The immediate ly

following paragraph, par agraph (n), reads: “The waiver and suspension of any statutory periods of limitation for assessme nt and col lection o f the amo unt of the tax liability described in item (5), continue s to appl y: w hile the o ffer is pending ( see (m ) above) . . . and for one additional y ear beyond each of the time

periods i dentifie d in this paragraph.” The governm ent argues that the offer in compromise wa s “pend ing” until the withdrawa l was a cknow ledged, and the exact langua ge of the acknowledgment letter does not affectNo. 02-3260 United States v. Donovan 5

the form waiving

the statut

e of limita

tions. I t cites th e langua ge of

paragraph (m), which re ads: “The offer remains pen d ing until an authorized IRS official . . . acknowledg es withdrawal of the offer in writing.” It argue s that some affi rmative action by the g overnment, accepting the off er , rejecting the offe r, or acknowledg

ing its wi

thdrawa l, is required in order to set the statue of limitations running again. The government argues that the f orm letter sent to Donovan contains the effective withd rawal da te merel y to indicate that the government can no longer a ccept the offer in compromise, and that this has nothing to do with when th e statute of limitations begins to run again. The question of whether the language of an a gree ment is ambiguous is a question of law. Parret

v. Am. Ship Bldg. Co. , 990 F.2d 8 54, 85 8 (6th Cir. 1993) . Once t he lan guage of a contract has been held to be ambiguous, the interpretation of suchlangua ge is a question of fact that turns on the intent of the parties. Ibid . A c ourt , howeve r, may not use extr

insic evidence to cr ea te an am bi gu it y; t he am bi gu it y mu st be “apparent on the face of the contrac t.” Sch achner v. Blue Cross and Blue S

hield of Ohio , 77 F.3d 889, 893 (6th Cir. 1996). The district court first found that the terms of the contract were clear a

nd unambig

uous. Having done so, it was error for it to go on and attempt to discern the i nte nt of the p arties. The intent of t

he parti es is best d

etermine d by

the plain langua ge of the contract. United States v. Hodgekins , 28 F.3d 610, 614 (7th Cir . 1994) (h olding that extension of the st atute of limitations

on IRS F orm 2750 is

given effect in accordance with its plain meaning). While we recognize that Form 656 could have be en more clearly drafted, an d perhaps should be, the key language of Form 656 – that the “offer r em ains pending until an authorized

IRS official . . . acknowledg es the withdrawal of th e offer in

writing ” – is unam

biguous on its fac e. The I

RS acknowledgment

letter its elf does

n ot contrad

ict the pla

in 6 United States v. Donovan No. 02-3260

terms o f Form 656. We find persuasive the government’s argument that the date of the effective withdrawal of the offer is a diffe rent matt er from t hat of the date when the offer is no longer “p ending” pursuant to paragr aph (m). It may

indeed be true, as the district

court states, that “the withdrawal of an offer in compromise is effective as of theda te the taxpayer writes his letter of withdrawal.” That judgment, however , would be true as a matter of sub stanti ve contract law. See Resta t ement (Second) of Contracts § 42 (1981). However, t he statute of limitations question turns on when the off e r ceases to be “pending” unde r paragr aph (m) of Form 656. The latter c ontr ols when the statut e of limita

tions begins to run again. Anobjection could be

made tha

t the gov ernment could con tro l and manipulate the statute of limitations simply by failing to acknowl e dge the withdrawal of an offe r. That argumen t, w hich we do not address here, could arise in a future case if there appeared to be a factu al basisfor it. Here, however, the government cannot possibly be ch arged with unreasonabledelay in sending an acknowledgmen

t of t he withdrawal seven bu siness day s a fter receiving a letter withdrawing the offer in compromise. The district court erred in gran tin g summar

y ju dgment t o Don ovan. T he statute of limitations began to run again on April 28, 2000, the date of the acknowledgment in writing of the withdrawal of the off er in compromise. The suit is not un ti me ly. III For all of the reasons set forth above, we R EVERSE and R EMAND to the district court with instructions to ent e r summary judgmen t in favor of the g overnme

nt.