FI L ED U.S. COURT OF A P P E A LS E LE V EN T H C IR C U IT AUGUST 12, 2005 THOMAS K. KAH

N CL ERK [PUBLIS H] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ N o. 04- 1297 6

____ ____ ____ ____ ____ ____ D. C. Docket N o. 02-01702 -CV -G ET -1 AL ANI. BE GN ER , COR Y B EG NE R, Pl ai nt iff s- App el la nt s, ve rs us UNITED STAT ES OF AMERIC A, Defen da nt -Ap pe ll ee.

____ ____ ____ ____ ____ ____ Appeal f rom the United State s District Court fo r the N orthe rnD istri ct

of G eo rg ia

____ ____ ____ ____ ____ ____ _ ( A ug us t 12, 200 5) Be fo re E D MO N D SO N , Ch ie f Judg e, T JO FL A T and KRA V IT CH , Ci rc uit Jud ge s.2

TJO FL AT , C ircuit Judg e: T his c as e is a

bout tw o taxpay er s’ O ff

er in Co m pr om ise ( O IC ), w hic h is a contract betw een a taxpay er and the Internal Revenue Ser vice in which the IRS ag rees to acce ptan am ou ntdi ffer en t fr om whatth e ta xp ay er o wes in tax es . Specifica lly , the c ase is about whether the O IC per m its the taxpay ers to deduct am ount s th at

the y pa id unde r a se parate a gr ee m en t tha t the y ha d w iththe I RS . T he ta xpay er s de duc te d th e am ount . T he I RS obj ec te d, on the gr ound s th at the deduction violated the term s of the OI C. The district court agreed w ith the IRS and granted the IRS’ s m otion for sum m ary j udgm ent. W e also agree with the IR S, an dth u s a f

f i rm. To explain our reasoning, w e divide this opini on int o three parts. In Part I, we detail the fac ts. I n part II, we apply the law —both j urisdictio nal and contract law—to these fa cts. I n part III , w e briefly conclude. I. The ta xpay ers ar e A lan Begner and his wife , C ory Begner. T hey

owed three ty pe s of ba ck ta xe s: ( 1) e m

plo ym en t t ax es f

ro m 198 4- 1990 , ( 2) une m

plo ym en t ta xe s f ro m 198 3- 1991 , and ( 3) inc om e ta xe s f ro m 198 4- 1987 . T he Be gne rs c oul d no t pay the se ba ck

ta xe s and d id n ot w an t t o f ile f or bankrupt cy , so they

each sought an OIC by

subm itting Form

656 to the IRS underAlthough A lan and Cory Be g ner submitted sepa

rate OI C’s, beca

use they did so on 1 ide nti c a l f

or ms, we tr e at th e ir

tw o O I C’ s a s o ne OI C. Although A lan and Cory

Be g ner signed sepa

rate Collateral Agree ments, beca use they 2 did so on ide nti c a l f

or ms, we tr e at th e ir

tw o Co llate ra l A g re e me nts a s o ne Col late ra l A g re e me nt. 3 26 U. S. C. § 712 2. A lan soug ht a relea se from liabilityby

offer ing to pay 1 $100 ,000; Cory , $30,000. I tem 2 on Form

656 was for the B egners’ social se curi ty num be rs . I te m

5 w as f or the a m ount s th e Be gne rs of fe re d to pay . Apr ior version of Form

656, however, required the Be gners to list th e am ount s that they we re off ering to pay

in item 2. T his lurki ng dis crepancy —one version of Form 656 re qui ri ng s oc ia l se curi ty num be rs in ite m

2, anothe r re qui ri ng the a m ount offer ed—created the dispu te betwe en the Begners and the IRS . To r elease the B egners from their tax liability , the I RS w anted m ore than j ust the OIC: a s a form

of additional con sideration, the IRS required the Be gners to s ignaCo llate ra l A gr ee m en t. T he A gr ee m en t r equir ed that i n a ddi tio n to the 2 $100 ,000 and $30 ,000, the Be gners would “ pay out of annual in com e for the y ears 1997 to 2001 ” the f

oll ow ing a m ount s: (a ) N oth ing on the f

ir st $ 144, 000. 00 o f annua l i nc om e[ ;] (b) 30% of annual in com e m ore than $144 ,000.00 and not m ore than $154 , 000. 00[ ;] (c) 50% of annual incom e m ore than $154 ,001.00 and not m ore than $164 , 000. 00[ ; and] (d ) 70 % of a nn ua l i nc om e m or e th an $1 64 ,00 1.0 0[ .] T he Be gne rs a gr ee d. T he lur kin g di sc re panc y

in the Be gne rs ’ O IC r es ult ed f ro m4

the Collateral A greem ent’ s definition of “ annual incom e”: [T ] he term

annual incom e . . . m eans adj usted gross incom e as defined in section 62 of the Internal R evenue Code (exce pt loss es from sales or e xc hange s of

pr ope rty sha ll not be a llo w ed ), plu s a ll nont ax ab le inc om e an d pr of

its or ga ins f ro m any sourc e w ha tso ev er

( inc lud ing the fair m arket value of gifts, bequests, devises and inh eritances) , m inus (a) the Feder al incom e tax paid for the y ear for which annual i n c o me i s b e i n g c o mp u t e d , an d( b ) an y p ayme n tma d e u n d e r th e t e rms of the of fe r in c om

pr om ise ( Fo rm

656 ), a s sh ow n init em

2, f or the y ear in which such paym ent is m ade. (e m pha sis a dde d) . T o pu t i t si m ply , the Co llate ra l A gr ee m en t r ef er re d to “ any paym ent m ade under” the O IC “ as shown in item 2,” but th e Begners’ item 2 wa s their social security

num bers. This w as a m istake, but one that no o ne noticed at the ti m e the Be gne rs sig ne d th e Co llate ra l A gr ee m en t. For the next fewy ears, the Begners paid am ount s that they thoug ht wer e re qui re d by

the ir Co llate ra l A gr ee m en t. T he dis tr ic t c ourt de sc ri be d th es e y ears : In tax y ear 1997 , plaintiffs r eported on their incom e tax re turn an ad j ust ed gr oss inc om e (A G I) of

$22 5, 764. 00, and p ai d in co m e ta x of $56, 628. 00. U nde r the c oll at er al a gr ee m en t, pla int if fs r ep orte d th ei r “ annua l i nc om e” a s $1 69, 136. 00 ( ad j ust ed gr oss inc om e m inu s inc om e ta x pa id) . T his c al cu latio n r es ult ed in a co llate ra l a gr ee m en t paym en t of

$11 , 595. 00. For tax y ear 1998 , plaintiffs r eported on their incom e tax re turn an A G I of $27 8, 622. 00, and p ai d in co m e ta x of $70 , 534. 00. U nde r the collateral a greem ent, plaintiffs re ported their “ annual incom e” as $196 , 493. 00. P la int if

fs r ea ch ed

thi s am ount

by de duc tin g f

ro m the ir A G I inc om e ta x pa id ( $70, 534. 00) and the c oll at er al a gr ee m en t paym en t m ad e the pr ev iou s y ear ($ 11, 595. 00) . T his c al cu latio n le d to5

a co ll at eral ag reem en t p aym en t o f $3 0,7 45 .00 . Fo r ta x y ear 1999 , pla int if f co m put ed the ir “ annua l i nc om e” in a sim ilar fa shion . On their incom e tax re turn, plaintiffs reported an AG I of $272,629.00, and paid tax of $63,158.00. Plaintiffs ca lculated th ei r “ an nu al in co m e” o f $1 78 ,72 6.0 0 b y subt ract in g fr om

th ei r AGI both the am ountof incom e tax paid ($63,158.00) and the collateral ag re em en t paym en t f

ro m the pr ev iou s y ear ($ 30, 745. 00) , r es ult ing in a co llate ra l a gr ee m en t paym en t of $18 , 309. 00. Be gne r v. U nit ed

S tate s, N o. Ci v. A . 1:0 2C V 1702 G E T , 200 4 W L 138 6333 , a t *3 (N .D . G a. Apr. 15, 2004). D uring these y ears, neither the Begners nor the I RS noticed the stil l-lurking d iscrepancy . The B egners also did no t seem to noti ce Fo rm 343 9, w hic h th ey

sig ne d f or the y ears 199 7- 1999 . F orm 343 9 e xpl ic itl y st at edth atCo ll at eral Agre em en t p aym en ts can no t b e d educ te d. A ft er Co ry se nt the I RS ale tte r re que sti ng h ar dshi p r el ie f fo r anil lne ss f ro m w hic h sh e suf

fe re d, the I RS dis co ve re d th e dis cr ep an cy c onc er nin g it em 2. I n a le tte r to the Be gne rs , the I RS w ro te , “ Y ou c annot de duc t paym en ts m ad e, in pr ior y ears, accor ding to the Future Incom e Collatera l Agre em ent, a gainst Adjusted Gr oss Incom e. ” T he IRS rec om puted th e Begners’ liabilityto determ ine that they shou ld have paid an additi onal $31 ,884.84. The I RS then w rote that the Begners we re in defa

ult, and thus needed to pay the $31,844.84 if they

wanted “ to keep [the ir ] O ff

er s inf or ce . ” T he Be gne rs a cquie sc ed , pay ing the I RS $31 , 844. 84. T he Be gne rs the n f

ile d an a ct ionto re co ve r the $31 , 844. 84 ( plu s in te re st)We d isc us s se c tio n 1 34 6 in Part I I .A . Se c tio n 1 34 0 p ro vid e s th at “ [t]he dis tr ic t c ourt s 3 shall have or igina l jurisdiction of any civil action ar ising unde r any Act of Congress providing for inter nal re venue, or

reve nue fr om imports or tonnag e except matter s within the jurisdiction of the Court of International Trade .” We do not focus on se ction 1340 beca use it, unlike section 1 3 4 6 , d o e s n o te x p l i c i t l y w a i v e s o v e r e i g ni m mun i ty. 6 unde r 28 U . S. C. §§ 1 340 an d 13 46. T he Be gne rs and the I RS f ile d c ro ss- m oti ons 3 fo r sum m ar y j udgm en t. T he dis tr ic t c ourt r ej ec te d th e IR S’ s arg um en t tha t the co urt di d no t have j ur isd ic tio n. T he c ourt the n gr an te d th e IR S’ s m oti on f or sum m ar y j udgm en t, hol din g th at

the Be gne rs “ inc or

re ct ly de duc te d th ei r pa st collateral a greem ent paym ents from their A GI when com

putin g their ‘ annual i n co m e’ u n d erth e t erm

o f t h ei r c o m

p ro m i s e w i th th e I RS .” Be g n er , 2 0 0 4 WL 1386 333 at

*5. T he Be gne rs appe al ed . II.

“ [W ] e re vie wadis tr ic t c ourt’ s gr an t of am oti on o f sum

m ar y j udgm en t de novo . ” Cuvil lie r v. Ro ck da le Co unty , 390 F . 3d 1 336, 133 8 ( 11th C ir . 200 4) . A ll iss ue s of m at er ia l f

ac t are r es olv ed

in favor of the non -m ovi ng p ar

ty . I d. Ther e ar e tw o issu es on appeal: (1) w hether the district court had j ur isd ic tio n to he ar

the c as e, and ( 2) w he the r the te rm s of the Be gne rs ’ O IC and Collateral A greem ent perm it them to deduct their previous y ear’ s Collateral A gr ee m en t pay

m en ts. L ike the dis tr ic t c ourt, w e an sw er the f ir st que sti on i n th e affir m ative and the second qu estion in the negative.The Tuc ker A ct has a sibling, known a s the L ittle Tucker A ct, 28 U.S.C. § 1346(a)( 2), 4 wh ic h “ g ra

nts c on c ur

re nt j ur isd ic tio n to bo th U .S. dis tr ic t c ourt s a nd the Court

of F e de ra l Cla ims for c ontrac tual claims ag ainst the United States not exceeding$10,000.” Roberts v. United States, 242 F.3d 1065, 1067-68 ( Fe d. Cir. 2001). Be cause the OI C in thi s case was for $3 1, 84 4. 84 , w e on ly

ne e d to a dd

re ss t he Tu c ke r A c t.

7 A. T he re are tw o st at

uto ry play er s inde te rm ini ng j ur isd ic tio n inthe ins tant case: the T ucker A ct, 28 U. S. C. § 149 1(a)( 1), and the tax-refund statute, 28 U. S. C. § 1 34 6( a)(1 ). T he I RS ba se s it s arg um en t onthe T uc ke r A ct , w hic h pr ovi de s th at “ [t ] he U nit ed S tate s C ourt of

F ed er al Cl ai m s sh al l have j ur isd ic tio n to r en de r j udgm en t upon any claim against the United States founded . . . upon any express or im

plied co ntr ac t w iththe Unit ed

S tate s. ” 28 U . S. C. § 14 91( a) (1 ). U nde r the T uc ke r A ct , the Co urt of

F ed er al Cl ai m s ha s e xc lus ive j ur isd ic tio n f or c ontra ct s ine xc es s of $10, 000. F ri edm anv. U nit ed S tate s, 391 F . 3d 1 313, 131 5 ( 11th C ir . 200 4) ( ci tin g Mark D unni ng I ndus . , I nc . v. Ch en ey , 934 F . 2d 2 66, 269 ( 11th C ir . 199 1) ). T he 4 IR S ar gue s th at , und er

the T uc ke r A ct , “ the D istri ct Co urt l ac ke d j ur isd ic tio n be ca use thi s c as e inv olv es ac la im f or m or e than $1 0, 000 that i s f ound ed on a co ntr ac t w iththe Unit ed

S tate s and the re fo re is w ith in the e xc lus ive j ur isd ic tio n of the Co urt of

F ed er al Cl ai m s. ” T he I RS r eque sts that w e re m an d th is c as e to the dis tr ic t c ourt f

or tr an sf er und er 28 U . S. C. § 16 31 t o th e Co urt of F ed er al Cl ai m s.8

U nli ke the I RS ’ s f

oc us o n th e T uc ke r A ct , the Be gne rs f oc us o n se ct ion 1346 (a )( 1) , the ta x- re fund s tatut e. T he Be gne rs r el y on s ec tio n 13 46( a) (1 ) be ca use without it, the United State s, as a sovereign, could not b e sued. F .D .I .C. v. Me y er, 510 U . S. 471 , 475 , 114 S . Ct . 996 , 100 0, 127 L . E d. 2d 3 08 ( 1994 ) (“ Abse nt a w ai ve r, sov er ei gn i m

m uni ty shi el ds the F ed er al G ove rn m en t and i ts a ge nc ie s f ro m suit.”). Under section 134 6(a)( 1), how ever, the United State s explicitlywa ives sovereign imm

unityfor ca ses falling within the statut e’ s reac h. Mutual A ssurance, In c. v. U nit ed

S tate s, 56 F . 3d 1 353, 135 5 ( 11th C ir . 199 5) ( ci tin g se ct ion 1346 (a )( 1) and s tatin g th at “ [t ] he U nit ed

S tate s ha s w ai ve d it s so ve re ignim m uni ty in order to allow taxpay ers to file a ctions seekin g tax refunds”). The j urisdictio n issu e is thus sim ple: are the B egners and the district court correc t that this is a tax-r efund case under section 1346 (a)( 1), or is it a contract ca se und er

the T uc ke r A ct ? If

it is the f orm er , w e have j ur isd ic tio n; i f it is the la tt er, we d o n ot . Ina ddr es sin g th is i ssu e, c ourts l ook pa st the f orm of the a ct ionand de te rm in e whe th er t he cla im is , “ atit s es se nc e,” a co nt ractor atax -ref un d c as e. Me ga pul se , I nc . v. L ew is, 672 F . 2d 9 59, 968 ( D . C. Ci r. 198 2) ( “ T he c la ssi fi catio n of apart ic ular ac tio n a s on e w hic h is or is not ‘ at it s e sse nc e’ ac ontra ct

a ct ion de pe nds both onthe sourc e of the r igh ts u

pon w hic h th e pla int if

f ba se s it s c la im s,9

an d up on the ty

pe of r el ie f soug ht ( or

appr opr iate ). ”) ; se e al so F ri edm an , 391 F . 3d at 131 5 ( ci tin g M eg ap uls e fo r the r ule that “ [a ] pla int if

f cannot a voi d th e j ur isd ic tio na l l im itatio ns o f the T uc ke r A ct . . . by art fu l pl ea din g” ); Up S tate F ed . Credit U nion v. W alker, 198 F.3d 372, 376 (2d Cir. 1999) (“ [T ] he two-pronged fo rm at ionof

Me ga pul se , w hic h e xam ine s bo th the sourc e of the r igh ts at i ssu e an d the nature of the re m edy

sough t, builds log ically

on the analy sis this Circuit has de ve lop ed

to as se ss j ur isd ic tio n inthe r el at ed c ont ex t of

the gov er

nm en t c ontra ct s pr oc es s. ”) ; N orth S tar A la ska v. U nit ed S tate s, 14 F . 3d 3 6, 37 ( 9thCi r. 199 4) (quotin g Megapulse). W e m ust determ ine whether the Begners’ claim is at its essence a c ontract or ata x- re fund c as e. T o do thi s, w e ne ed to de fi ne e xa ct ly

w ha t c onst itute s ata xre fund c as e. T he statut e’ s langua ge is br oa d, usi ng the w or d “ any ” fi ve ti m es : A ny c ivi l a ct iona ga ins t the U nit ed S tate s f or r ec ove ry of any int er na l- re ve nue ta x a lle ge d to have be ene rr one ousl y or il le ga lly assessed or collected, or

any penalty claim ed to have been collected w ith out auth or ity or any sum a lle ge d to have be ene xc es siv e or in any m an ne r wro ng fu ll y

co ll ect edun de r th e in te rn al -rev en ue laws . . . . 28 U . S. C. § 13 46( a) (1 ); se e al so Unit ed S tate s v. W ill iam s, 514 U . S. 527 , 529 , 115 S. Ct . 161 1, 161 4, 131 L . E d. 2d 6 08 ( 1995 ) (s tatin g th at se ct ion134 6( a) (1 ) co nta ins “br oa d langua ge , ” w hic h th e Co urt the n a ppl ie d to ape rs on who p ai d a ta x “ ev entho ugh the ta x sh e pa id w as a sse sse d a ga ins t a thi rd party ”) . U nde r the10

te rm s o f th is st atut e, if

th e Beg ne rs pa idth e IRS “ an y su m all eg edto ha ve be en . . . in any m anne r w ro ngf

ull y c oll ec te d un de r the int er na l- re ve nue law s, ” the n th ei r case is a ta x-ref

und case. If w e re ly on the pla in l an gua ge of se ct ion134 6( a) (1 ), thi s c as e is e as y . T he Begners deducted their Collatera l Agre em ent paym ents from the previous y ear when com

putin g their curre nt Collateral A greem ent liability . The I RS said that thi s vi olate d th e te rm s of it s a gr ee m en t w iththe Be gne rs , and i t de te rm ine d th e fu ll am ount that the Be gne rs sho uld

have pa id. T he I RS sa id tha t i f the Be gne rs did no t p ay th is ful l am ou nt(i.e ., th e $ 31 ,84 4.8 4) , th ey wou ldde fau lton th ei r OIC. T he Be gne rs pa id, and the n f ile d an a ct ionse ek ing to re co ve r the $31 , 844. 84 ( plu s int er es t) . R ed

uc ing the above f

ac ts t o th ei r es se nc e, he re is w ha t ha ppe ne d: the Be gne rs de duc te d am ount s f ro m the ir paym en ts t o th e IR S that the I RS tho ught the Be gne rs c oul d no t de duc t, the I RS c oll ec te d th ose a m ount s f ro m the Be gne rs , and the Be gne rs c onse que ntl y sue d th e IR S fo r a re fund. T he br oa d, pla in l an gua ge of se ct ion134 6( a) (1 ) en co m pa sse s th is s ce nari o. N o c as e is d ir ec tly

on p oin t, but

the re are se ve ra l c as es that are suf fi ci en tly sim ilar to be useful. The m ost im portant case, and the one on which the dis trict court relied, is Roberts v. United States, 242 F. 3d 10 65 (Fed. Cir. 2001 ). In Roberts, the I RS and a ta xpay er e ntered into an OIC resolving li ability for back11

ta xe s. I d. a t 10 66- 67. T he I RS “ ac cu se d [ the ta xpay er ] of vio latin g th e te rm s of the O IC , ” so i t t er

m inate d th e O IC , “ m ak ing [ the ta xpay er ] li ab le f or his unp ai d federa l tax liability .” Id. at 1067. T he taxpay er paid all of his back taxes and filed a ta x- re fund c as e. I d. T he F ed er al Ci rc uit state d th at

“ [t ] ax c as es he ar d inthe district courts often inv olve offers in com prom ise.” Id. at 1069. It then em pha siz ed that “ [t ] he f

ac t tha t the a lle ge d c oll ec tio n e rr or ste m s f ro m the cancellation of [taxpay er’ s] OI C contract w ith the IRS does not negate the fact that the m onies were paid pursuant to the internal-revenue law s.” Id. The F ederal Ci rc uit the n he ld— str es sin g th e br oa d langua ge of se ct ion134 6( a) (1 )—

that this sit ua tio n is a t i ts e sse nc e at

ta x- re fund c as e an d no t a c ontra ct a ct ion . I d. Whil e sim ilar, our

c as e is n ot h an d- in- glo ve be ca use in Ro be rt s th e IR S te rm inate d th e OI C, wher eas here the OI C w as still in effect. Roberts is still im portant, however , for its rem inder that even thou gh the iss ues in a case m ay focus on the contractual term s of an OI C, such a focus does no t rem ove that case fr om section 134 6(a)( 1). A nothe r use fu l c as e is W ilk en s v. U nit ed S tate s, N o. 03- Ci v. -1 837, 200 4 U. S. Dist. LE XI S 8079 (D. N. J. F eb. 19, 2004 ). In W ilkens, two taxpay ers enter ed int o O ff er s inCo m

pr om ise to se ttl e ta x li ab ili ty , and “ [u ] nde r the te rm s of the O ff er s inCo m

pr om ise , [ the ta xpay er s] a gr ee d to m ak e ce rt ai n paym en ts and t o enter into a future incom e collatera l agreem ent.” Id. at *1. T he taxpay ers abided12

by their O IC f

or a fe w y ears, but they

and the IRS soon dispu ted the m eaning of a te rm in the ir O IC . I d. a t *2 . T o r es olv e that di sput e, the ta xpay er s f ile d a de cl ar at or

y -j udgm en t a ct ion . I d. a t *3 . W hil e the dis tr ic t c ourt f

oc use d on dif fe re nt r ule s th antho se a t i ssu e he re , the c ourt a lso f oc use d onRo be rt s, r ea ch ing a sim ilar co nc lus ion : Inthi s c as e, a s inRo be rt s, the tr ue na tur e of

the sui t i s no t contractual. While [taxpay ers] dispu te the am ountowed . . . under the Of fers in Com

prom ise, the O ffer s in Com prom ise ref

lect an ag re em en t c onc er

nin g m oni es ult im at el y

due and o w ing a s ar es ult of the int er na l r ev enue law s. Id . a t *8 ; c f. Ro bin ette v. Co m m iss ion er , 123 T . C. 85, 108 ( 2004 ) (c iti ng R obe rt s an dfo cu s i n g o nth e s o u rc e o f t h e u n d er l yin g d i s p u t e ( i .e ., t h e C o m m i s s i o n er ’s abuse of discretion), and not on the m ere existence of an O IC). These sam e principles apply here. T rue, the dispu te is about ho w the O IC de fi ne s “ annua l i nc om e. ” I n c om put ing the ir

Co llate ra l A gr ee m en t paym en ts f or 1998 and 1999 , the B egners deducted the Collateral A greem ent paym ents they m ade in the previous y ears. T hat this case is a disput e about contract interpretation, however , “ does not negate the fac t that the m onies at issu es we re pa idpu rs ua ntto th e in te rn al -rev en ue laws .” Ro be rts , 24 2 F .3dat 1 06 9. As we stated before, this case is easy when based on a plain rea ding : the IRS collected sum s f ro m the Be gne rs that the y

tho ught w er e w ro ngf

ull y c oll ec te d. T he se f

ac ts13

satisfy what sec tion 1 346(a)(1) dem ands to con stitut e a tax- refund case. T he I RS c annot

r eb ut this pla in r ea din g. I t tri es by m ak ing se ve ra l i te ratio ns of the sam e ar gum en t: be ca use the Be gne rs ’ c la im s are ba se d onthe te rm s of the ir O IC and C oll at er al A gr ee m en t w iththe I RS , and b ec au se c ontra ct lawgov er

ns, thi s c as e is at i ts e sse nc e a co ntr ac t c as e. A s st at ed above , how ev er , that the c as e tur ns o n an in te rp re tatio n of ac ontra ct

doe s no t t ak e it out

of the r ea chof

se ct ion 13 46 (a)( 1) . As su ch , we hav e juri sd ic ti on to he ar t hi s ca se . B. An O IC is a c ontract betwe en a taxpay er and the IRS in w hich the IRS agrees to ac cept a pay

m ent differe nt from

what the taxpay er ow es. Tr adition al ru le s of c ontra ct lawappl y

to anO IC . U nit ed

S tate s v. L an e, 303 F . 2d 1 , 4 ( 5th Cir. 1962 ) (“ It has long been settled th at an agre em ent com prom ising unpaid taxes is a c ontra ct and, c onse que ntl y , that i t i s go ve rn ed by the r ule s a ppl ic ab le to contracts generally .” ). T he Com m issio ner of the I RS has the authority to reac h an O IC or oth er c om pr om ise a gr ee m en t i n any c as e “ ar isi ng unde r the int er na lrevenue law s.” 26 U. S. C. § 712 2(a). Acollateral a greem ent often adds further co ns id erat io n fo r an OIC. E.g., Fin en v. Co m m is si on er, 4 1 T.C. 5 57 , 56 0 (1 96 4) . T oge the r, the O IC ( Fo rm 656 ) an d th e Co llate ra l A gr ee m en t ( Fo rm 226 1) com prise the contract at issue in this case.14

Fed eral co ur ts us e fed eral co m m on law t o e va lu at e g ov ern m en t co nt ract s. Fa lls Ri ve rw ay

Re al ty v. Ci ty of N ia gr a Fa lls , 754 F . 2d 4 9, 55 n . 4 ( 2d C ir . 198 5) (c iti ng P ri eb e & S ons v. U nit ed S tate s, 332 U . S. 407 , 68 S . Ct . 123 , 92 L . E d. 32 (1 947) ); se e al so W . S ec . Co . v. D er w ins ki, 937 F . 2d 1 276, 128 0 ( 7thCi r. 199 1) (“ Su its to en fo rc e co ntr ac ts w ithf ed er al a ge nc ie s are gov er ne d by f ed er al c om

m on law . . . .” ). When “ determ ining what par ticular doctrine to apply

in a particular sui t, [ how ev er , ] the c ourt w ill of te n se le ct ar ule of state law . ” D er

w ins ki, 937 F. 2d at 12 80 ( ci tin g U nit ed S tate s v. Y az el l, 382 U . S. 341 , 86 S . Ct . 500 , 15 L . E d. 2d 4 04 ( 1966 )) ; se e al so Unit ed S tate s v. P ap pa s, 94 F . 3d 7 95, 801 ( 2d C ir . 199 6) (stating that “ applicable general principles of state law ” can inform feder al co m m on l aw ). H er e, w e re ly

in part on G eo rg iac ontra ct

lawbe ca use m ost of the events occurred in Ge orgia. U nde r G eo rg ialaw , c ourts e xam ine ac ontra ct in its e nti re ty

in or de r to int er pr et any part the re of . G a. Co de A nn. § 13 -2 -2 (4 ). S pe ci fi ca lly , c ourts f oll ow a thr ee -s te p pr oc es s ine xam ini ng c ontra ct s: A t l ea st i nit ia lly , c onstru ct ionis a m atte r of lawf or the c ourt. F ir st, the tri al co ur t m

us t d eci de whet he r th e la ng ua ge is cle ar an d u na m bi gu ou s. If it is, the court sim

ply enforce s the contract acc ording to its clear te rm s; the c ontra ct

a lon e is l ooke d to f

or it s m eanin g. N ex t, if

the co ntr ac t i s am

big uous in som e re spe ct , the c ourt m ust appl y the r ule s of co ntr ac t c onstru ct ionto re sol ve the a m big uity . F ina lly , if

the am big uity r em ai ns a ft er

appl y ing the r

ule s of c onstru ct ion , the iss ue of15

what the am

bigu ous lang uage m eans and what the parties intended m u s tb e r es o l v edb y [t h e t ri ero f f ac t ]. E udy v. U niv er sa l Wre stl ing Co rp . , 611 S . E . 2d 7 70, 773 ( G a. Ct . App. 200 5) (quot ing S ch w ar

tz v. H ar ri s W as te Mg m

t. G ro up, 516 S . E . 2d 3 71, 375 ( G a. Ct . App. 1999 )). T o m ove be y ond the f

ir st s te p, w e m

ust de ci de that the c ontra ct

is am big uous . Whe the r or

not ac ontra ct

is am big uous is a que sti on o f lawf or the co urt. G a. Co de A nn. § 13 -2 -1 ; T ec hw er ks v . Re ta il T ec h. Co rp . , 509 S . E . 2d 8 4, 8 5 ( G a . C t . Ap p . 1 9 9 8 ) . A c o n tr a c ti s a mb i g u o u s i f i tc o n t a i n s a“ dup l i c i ty, ind ist inc tne ss, an un ce rt ai nty of m eanin g or

e xpr es sio n” that m ak es it sus ce pti ble to s ev er al r ea sona

ble int er pr et at ion s. H olc im

( U S) , I nc . v. A MD G , I nc . , 596 S. E . 2d 1 97, 200 ( G a. Ct . App. 200 4) ( quot ing E ar ly v. K en t, 108 S . E . 2d 7 08, 709 (G a. 195 9) ). Ac ontra ct

that i s di ff

ic ult to co nstru e is n ot am

big uous unl es s th e ru le s of c ontra ct int er pr et at iondo n ot r es olv e w hic h of se ve ra l po ssi ble int er pr et at ion s r ep re se nt the tr ue int en t of

the part ie s. F & F Co pie rs , I nc . v. K ro ge r Co . , 391 S . E . 2d 7 11, 713 ( G a. Ct . App. 199 0) . I f a co ntr ac t i s am big uous , the n th e co urt a ddr es se s ahos t of oth er c onsi de ratio ns, suc h a s e vid en ce of sur ro undi ng c ir cum stanc es . G eo rg iaA ss’ n of E duc at or s, I nc . v. P ar ag on Pr oduc tio ns, I nc . , 520 S . E . 2d 3 7, 39 ( G a. Ct . App. 199 9) ; H ar ri s C or p. v. G ie sti ng16

& A ssociates, 297 F.3d 1270, 1274 (11th Cir. 2002). If the term s of the contract are u na m bi gu ou s, h owe ve r, co ur ts in te rp retitacco rd in g t o i ts pl ai n m ean in g. Grif fin v. Ad am s, 3 34 S.E.2d42 , 44 (Ga. Ct . App . 19 85 ). Here, we ca n h al t o uran al y si s af te r th e fi rs t s te p b ecau se th e co nt ract(i.e ., the O IC and C oll at er al A gr ee m en t) is unam big uous : ne ith er

the pla in m eanin g of the O IC nor

the Co llate ra l A gr ee m en t pe rm its the Be gne rs to de duc t pa st Co ll at eral Agre em en t p aym en ts . U nde te rr ed

by the c ontra ct ’ s pl ai n m eanin g, the Be gne rs se ar chf or am big uity , arg uin g th at

the Co llate ra l A gr ee m en t’ s ( Fo rm 226 1) de fi nit ionof

“ annua l i nc om e” r en de rs the O IC and C oll at er al A gr ee m en t am big uous . T he Co llate ra l A gr ee m en t de fi ne s “ annua l i nc om e, ” in p ar t, a s “ any paym en t m ad e unde r the te rm s of

the of fe r in c om

pr om ise ( Fo rm

656 ), a s sh ow n init em

2, f or the y ear in which such paym ent is m ade.” A s stated above, because the I RS used an old er ve rs ionof

F orm 226 1, it inc or re ct ly r ef er en ce d it em

2 i nst ea d of

it em 5 i n the r ev ise d F orm

656 sig ne d by

the Be gne rs . I te m

5 of F orm 656 r ef le ct s th e am ountto be paid by

the Begners in the O IC. Aprevious version of Form 656 had required the O IC pay

m ent am ountbe put in item 2. I tem 2 in the revised Form 656 refers to the Be gners’ social security num bers, a num erica l refe rence that ca n n o tb e u s edt o ca l cu l at e a n n u al i n co m e. Th e B eg n er s as s er t th atFo rm 22 6 1 ’s17

refe rence to item

2 in Form

656 is m eaningless as it refer ences only a social se curi ty num be r (and n ot a

m one tary

a m ount ). T he y

f urthe r ar gue that i n or de r to giv e part ( b) of F orm 226 1 any m eanin g, it

sho uld be int er pr et ed to inc lud e the de du ct io n o f Co ll at eral Agre em en t p aym en ts . A lth oughthe I RS ’ s in adve rt en t us e of an ol de r Fo rm

656 c re at es c onf

usi on, that c onf usi on d oe s no t r ise to the le ve l of a m big uity —m uc h le ss s uf

fi ce to al low the Begners to deduct past Collateral A greem ent paym ents from their annual inc om e. D es pit e the it em -num be r m ix- up, the O IC and C oll at er al A gr ee m en t i n the ir e nti re ty ind ic at e that on ly

the lum p- sum paym en t l ist ed

on F orm 656 is a pe rm iss ibl e de duc tio n un de r part ( b) of F orm 226 1. T he O IC paym en t c anonl y be de duc te d un de r part

( b) of F orm 226 1 if it is pa id i n th e sam e y ear as the f ir st Co llate ra l A gr ee m en t paym en t. B ec au se the Be gne rs ’ f ir st C oll at er al A gr ee m en t paym en t w as due in 1998 f or the y ear 1997 , the y

c oul d no t de duc t the O IC a m ount of $130,000 they

paid in 19 96 from

their annual incom e. A s the Collateral A gr ee m en t be gan th e y ear af te r the I RS a cc ep te d th e Be gne rs ’ O IC paym en t, the $1 30 ,00 0 d oe s n otfal l wi th in pe rm is si bl e d educ ti on s u nd er p art(b) of F orm 22 61 . Re sol ute in the ir

se ar chf or a m big uity , the Be gne rs arg ue that be ca use the IR S pr ev en te d th e $130 , 000 paym en t de duc tio n, part ( b) m ust be int er pr et ed to include the dedu ction of Collateral A greem ent paym ents. I t does not follow that18

the Begners—prohibited from deducting the OI C am ountexplicitly perm itted unde r part

( b) of F orm 226 1 by ti m ing iss ue s—c ande duc t an a lte rn at ive a m ount not spe ci fi ed in any portio n of

the c ontra ct . F orm

656 onl y sho w s th e am ount

of the lum p-sum OI C paym ent of $130 ,000 and does no t list any of the Collatera l A gr ee m en t pay

m en ts. B ec au se part

( b) spe ci fi es that on ly

paym en ts o n F orm

656 can be deducted for the purposes of calculating annual incom e, the lum p-sum OI C paym en t i s th e onl y

pe rm iss ibl e de duc tio n. So de spi te the Be gne rs ’ se ar chf or a m big uity , the re is none . W e co uld e nd the opi nio n he re , and i t w oul d be c om ple te . N ev er

the le ss, the re is one na ggi ng questio n: if the use of the older version of Form 2261 that m istakenlyref erence d item 2 instead of item

5 on Form

656 is n ot am

bigu ous, then what is it? Stated m or e s i m pl y : i f w e c ann ot

c a l l the m i st ake an a m

bi gu i ty , w hatd o w e c a l l i t ? Fortunately , the G eorgia Suprem e Court answe red this questio n in Benedict v. S ne ad , 519 S . E . 2d 9 05 ( G a. 199 9) , c al lin g su chm ist ak es c le ri ca l, sc ri ve ne r, or ina dve rt en t e rr or s. I n B en ed ic t, the c ourt a ddr es se d ac ontra ct f or the sa le of

land that contained th e phrase “ on or before before April 15, 1998 ” in its tim e-is-of- thees se nc e pr ovi sio n. I d. a t 90 6. T he pur ch as er arg ue d th at

the “be fo re be fo re ” er

ro r cr eate d am

big uity , r ea soni ng “ that the c ontra ct it se lf doe s no t pr ovi de that the closing date is April 15, but ‘ on or before before ’ April 15, and that ‘ before19

be fo re’ Apri l 1 5 m

us t b e co ns tru edas n o l at er t ha n m id ni gh t o n Ap ril 14 .” Id . The c ourt rej ected the ar gum ent that this error cr eated am bigu ity , holding th at

“ ‘ [a ] ny m ist ak e in a

c ontra ct , c onsi sti ng o f som e uni nte nti ona l a ct or om iss ion , an d m an if

es tly am er e cl er ic al e rr or , in no s en se c hangi ng the c ontra ct or the re latio ns o f the part ie s th er et o, is re lie vable a t l aw . ” I d. ( quot ing G au dli ng v . Bake r, 71 S . E . 101 8, 101 9 ( G a. Ct . App. 191 1) ); se e al so P ri ce v. A ge , L td. , 390 S. E. 2d 24 2, 243 (Ga . C t. App. 1990) (rej ecting the argum ent that a m is-refe rence in a c ontra ct c re at es a m

big uity , r ea soni ng tha t “ ‘ 13. 1’ is a ty pogr ap hic al e rr or

f or

‘ 12.1’ ”). T he Benedict court concluded that such errors do not d efeat the clear int en tio ns o f the part ie s whe n th e co ntr ac t i s in te rp re te d init s e nti re ty , and the re fo re do n ot r en de r co ntr ac ts am big uous . 519 S . E . 2d at 90 6. H er e, the part ie s c ontra ct ed w iththe c le ar

int en t of se ttl ing the Be gne rs ’ pa st- due ta x li ab ili tie s. T he use of an ol de r ve rs ionof

the F orm 226 1 w as not

a sufficient err or to defeat this intent. Form 2261 ref erence s an item

line in Form 656 that pe rm its the il log ic al de duc tio n of asoc ia l se curi ty

num be r. T his refe rence does not m ake sense under Form 2261 ’ s definition of “ annual incom e. ” Part ( b) of F orm 226 1 is m eant t o r ef

er en ce anum

be r lis te d inF orm

656 that c oul d perm issib ly

be deducted in a calculation of annual incom e like the lum p-sum OI C paym en t m ad e by

the Be gne rs . T he re fo re , F orm 226 1’ s r ef

er en ce to the Be gne rs ’20

social security

num bers is a cler ical er

ror beca use it cannot be used to calculate an annua l i nc om e uponw hic h to ba se f uture Co llate ra l A gr ee m en t paym en ts. For an exam

ple of the differ ence betw een a c lerical e rror and an error that creates am

bigu ity , c onsid er United States v. H odgeki ns, 28 F. 3d 61 0 (7th Cir. 1994 ). I n th at

c as e, the I RS ’ s m ist ak enuse of the w or d “ int er

ple ad er ” ins te ad

of

“ im ple ad ” in i ts c ontra ct

w ithata xpay er

so f undam en ta lly

a lte re d th e subs tanti ve co re of the c ontra ct

and o bsc ur ed

the int en t of

the part ie s th at

the te rm s of

the contract w ere construed againstthe IRS . Id. at 614-15 . The m istaken word subs tit uti on c re at ed

c ontra ct ua l am big uity be ca use it a lte re d th e co ndi tio ns u

pon w hic h th e ta xpay er

a gr ee d to pe rm it the I RS to re ope n th e cl ai m . I d. Inc ontra st t o H odge kin s and i ts i nte nt- m odi fy ing m ist ak e, the m ist ak e in thi s c as e (i . e. , the m is- re fe re nc e to i te m 2 i nst ea d of

it em 5) is a m er e cl er ic al e rr or that is not so sufficiently

m isleading as to cre ate am bigu ity . Beca

use this clerical er ro r doe s no t a ff

ec t the le ga lity

of the c ontra ct

or the r el at ion shi p be tw ee n th e part ie s, it c anbe c or

re ct ed w ith out paro l e vid en ce or

c ontra ct r ef orm at ion . In sum , despite the Be gners’ searc h for am bigu ity , w e ar e left w ith an unam bigu ous cont ract that does not perm it the Begners to deduct their Collateral A gr ee m en t pay

m en ts. A cc or din gly , w e re j ec t the Be gne rs ’ e ff

ort t o r er ea d th e co ntr ac t t o r ef

le ct an un expr es se d te rm

pe rm itt ing the ir

de duc tio n of

pr ev iou s21

Collateral A greem ent paym ents, beca use a term

cannot be read into a contract w he re the re is no i ndi catio n th at it sho uld be the re . H em

pe l v. U nit ed

S tate s, 14 F. 3d 5 72, 578 ( 11th C ir . 199 4) ( re fu sin g to r ewri te ata xpay er ’ s c ontra ct w iththe IRS) . III. Fo r the r ea sons state d a

bove , thi s C ourt c onc lud es that the dis tr ic t c ourt di d not e rr in gr an tin g th e IR S’ s m oti on f or sum m ar y j udgm en t. AFFIR MED.