IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

UNITED STATES OF AMERICA, )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 04-0762-WS-M

 )

SEYMOUR A. IRBY III, et al., )

 )

Defendants. )

ORDER

This matter is before the Court on the plaintiff’s motion for summary judgment or, in the

alternative, for partial summary judgment. (Doc. 23). The parties have filed briefs and

evidentiary materials in support of their respective positions, (Docs. 24, 26, 32, 35), and the

motion is ripe for resolution. After carefully considering the foregoing materials, the Court

concludes that the motion is due to be granted in part and denied in part.

BACKGROUND

In 1990, the defendants were named co-executors of their father’s estate. Under their 

direction, the estate paid state and local taxes and made other payments but did not pay certain

federal taxes owed by the decedent at his death. The plaintiff brings this lawsuit to recover those

taxes, along with penalties and interest. The defendants argue that they cannot be liable because:

(1) no one told them that federal taxes had to be paid before other debts; (2) the parties

consummated a settlement agreement concerning the estate’s federal tax liabilities; and (3) the

plaintiff accepted partial payment of the debt as an accord and satisfaction.

DETERMINATIONS OF UNCONTROVERTED FACT

The defendants were granted letters testamentary on February 28, 1990. (Doc. 24,

Exhibit B). 

On or about July 20, 1990, the plaintiff filed a proof of claim, which includes the

following language:

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This debt has priority and must be paid in full in advance of distribution to 

creditors to the extent provided by law. See 31 U.S.C. Section 3713(a). 

Any executor, administrator or other person who fails to pay the claims of 

the United States in accordance with its priority may become personally liable 

for this debt under 31 U.S.C. Section 3713(b). 

(Doc. 24, Exhibit D at 2, ¶ 7).

While the defendants served as co-executors, the estate paid city and state taxes of at

least $30,000. (Doc. 24, Exhibit G at 7-9; id. Exhibit H).

On October 4, 1999, the estate and the plaintiff announced to the Probate Court that they

had reached a settlement agreement with respect to the plaintiff’s claim against the estate. The

settlement called for the estate to pay the plaintiff $37,840, plus interest at 8% per annum to the

date of payment, with payment to be made within 60 days. The defendants agreed to be removed

as co-executors should payment not be made within that time. (Doc. 24, Exhibit K at 2-3).

Payment was not made, and the defendants were removed as co-executors on January 25,

2000. (Doc. 24, Exhibit N). The general administrator was appointed administrator of the

estate. (Id.). In July 2000, the defendants offered to purchase two parcels of real property — the

only remaining assets of the estate — for $37,200. (Id., Exhibit P). On October 30, 2000, the

Probate Court authorized the sale. (Id., Exhibit Q). On June 7, 2002, the Circuit Court ratified

the Probate Court’s order and confirmed the sale of the property, directing the administrator to

distribute the residue of the estate to the plaintiff “in partial satisfaction of its lien against the

Estate.” (Id., Exhibit R). On October 17, 2002, the administrator wrote a check to the plaintiff

for $32,055.25 “in partial satisfaction of a tax lien,” (id., Exhibit S), and in her cover letter to the

plaintiff explained that payment was being made “in accordance with the Court’s [attached]

order dated June 7, 2002.” (Doc. 24, Exhibit T at 33, Exhibit G). The plaintiff received the

check on October 21, 2002, (id.), and applied it to the estate’s tax liability. (Id., Exhibit F).

As of September 30, 2005, the estate’s federal tax liability (assuming the failure of the

defendants’ arguments) was $69,631.62. (Doc. 24, Exhibit E).

CONCLUSIONS OF LAW

The Court has subject matter jurisdiction over this matter pursuant to 26 U.S.C. § 7402(a)

and 28 U.S.C. §§ 1331, 1340 and 1345. Venue is proper in this Court pursuant to 28 U.S.C. §§

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1391(b) and 1396.

Summary judgment should be granted only if “there is no issue as to any material fact

and the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). The

party seeking summary judgment bears “the initial burden to show the district court, by reference

to materials on file, that there are no genuine issues of material fact that should be decided at

trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). 

“When the moving party has the burden of proof at trial, that party must show

affirmatively the absence of a genuine issue of material fact: it must support its motion with

credible evidence ... that would entitle it to a directed verdict if not controverted at trial. [citation

omitted] In other words, the moving party must show that, on all the essential elements of its

case on which it bears the burden of proof, no reasonable jury could find for the nonmoving

party.” United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 1991)(en

banc) (emphasis in original); accord Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.

1993).

“If the party moving for summary judgment fails to discharge the initial burden, then the

motion must be denied and the court need not consider what, if any, showing the non-movant has

made. [citation omitted] If, however, the movant carries the initial summary judgment burden ...,

the responsibility then devolves upon the non-movant to show the existence of a genuine issue of

material fact.” Fitzpatrick v. City of Atlanta, 2 F.3d at 1116. “For issues on which the movant

would bear the burden of proof at trial, the non-movant, in order to avoid summary judgment,

must come forward with evidence sufficient to call into question the inference created by the

movant’s evidence on the particular material fact.” Id.

“There is no burden upon the district court to distill every potential argument that could

be made based upon the materials before it on summary judgment.” Resolution Trust Corp. v.

Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995). The Court therefore confines its consideration

to those arguments the parties have elected to assert expressly. 

A. The Estate’s Liability.

As noted, the plaintiff’s calculation of the estate’s tax liability is uncontroverted. Nor do

the defendants challenge the plaintiff’s legal right, in general, to collect such liabilities from the

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Three years of simple interest at 8% per annum would exceed $9,080. Because the

agreement called for daily compounding, (Doc. 24, Exhibit K at 2), the actual interest would be

greater. 

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taxpayer. They argue, however, that the settlement agreement precludes the plaintiff from

seeking additional funds. There are of course two huge problems with this argument. First, the

agreement called for the estate to make payment within 60 days of October 4, 1999 — or by

December 3, 1999 — yet the plaintiff received no funds until October 21, 2002, almost three

years later. Second, the agreement called for payment of $37,840 plus interest — or over

$47,000 as of October 20021

 — yet the plaintiff received only $32,055.25.

To counter the first difficulty, the defendants point to the agreement’s failure to specify

that time was of the essence, and they conclude that the 60-day period provided by the

agreement should therefore be ignored in favor of a “reasonable time” requirement in accordance

with Alabama law. They continue by endeavoring to excuse almost all of the three-year delay

between agreement and payment. The first eleven months, they say, was consumed by their

efforts to obtain a loan with which to purchase the estate’s property. They claim to have made

payment to the administrator “immediately” after receiving the loan, so that the remaining two

years of delay must be laid at the feet of the administrator and/or the state judicial system, not at

theirs. (Doc. 32 at 2). 

The construction of an agreement to compromise a federal tax liability is governed by

federal common law. Begner v. United States, 428 F.3d 998, 1004 (11th Cir. 2005). When the

federal common law is not yet developed, the Court may look to state law in determining how

federal common law should unfold. Id at 1004-05. The parties have cited, and the Court has

located, no case discussing “reasonable time” as a principle of the federal common law of

contracts. However, as the plaintiff (which cited Begner) has offered no reason why the Court

should not look to Alabama law in this regard in fleshing out federal common law, the Court will

do so. 

“In ordinary cases time of performance is, in equity, regarded as formal, and as meaning

only that the contract shall be completed within a reasonable time and substantially according to

the agreement, regard being had to all the circumstances.” Hunter-Benn & Co. v. Bassett

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Although unremarked by the plaintiff, its certified assessments reflect that it deemed the

“offer in compromise rejected” as of July 2000. (Doc. 24, Exhibit F). The notations may show

that the plaintiff considered the agreement rescinded, but it appears that federal common law

requires that, in order for a rescission to be effective, the rescinding party must give notice of the

rescission to the other party. See Griggs v. E.I. du Pont de Nemours & Co., 385 F.3d 440, 445,

449 (4th Cir. 2004)(as a matter of federal common law, rescission may be granted as a remedy

under the Age Discrimination in Employment Act; legal rescission, which occurs without

judicial intervention, “is effected when the plaintiff gives notice to the defendant that the

transaction has been avoided”). This appears also to be the law of Alabama, to the extent it is

looked to as informing federal common law. Alabama Football, Inc. v. Stabler, 319 So. 2d 678,

681 (Ala. 1975). There is no evidence that the plaintiff notified the defendants or the estate that

it was rescinding the settlement agreement. 

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Lumber Co., 139 So. 348, 349 (Ala. 1932). The defendants focus on the “reasonable time”

portion of Hunter-Benn but ignore its “substantially according to the agreement” limitation. 

That is, while this rule offers some flexibility when dealing with a specified time for

performance, the expanded time for performance cannot be simply reasonable but must also be

substantially in accordance with the parties’ agreed time for performance. Thus, while a

specified time for performance of 60 days may be enlarged by a few days (if that is otherwise

reasonable), it cannot be extended by several years, because any such exponential enlargement

of time could not be “substantially according to the agreement” of the parties for a 60-day

period. 

Thus, under the defendants’ own authority, the estate breached the settlement agreement

by failing to pay within, or shortly beyond, the 60-day window provided by the agreement. The

plaintiff, citing Cities Service Helex, Inc. v. United States National Helium Corp., 543 F.2d 1306

(Ct. Cl. 1976), argues that this breach “justified recession [sic]” of the agreement. (Doc. 35 at

5). True enough but, as Cities Service itself teaches, even when rescission is justified, in order to

actually rescind the non-breaching party must “decid[e] to close the contract and so conduc[t]

himself.” 543 F.2d at 1313. The plaintiff has identified no evidence that it decided to rescind

the settlement agreement or that it took any action evincing a rescission at any time before

receiving payment in October 2002.2 Failing rescission, “the obligations of both parties remain

in force and the injured party may retain only a claim for damages for partial breach.” Id. 

Because the plaintiff has failed to show that it rescinded the settlement agreement beforehand,

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The same reasoning and result govern the plaintiff’s unamplified parallel argument that

the defendants repudiated the settlement agreement by removing the case from Probate Court to

Circuit Court on December 6, 1999. (Doc. 35 at 5).

4

Accord Bear v. Commissioner, 1994 WL 96393 at **1 (9th Cir. 1994)(“There is no

accord and satisfaction from tax liability where the IRS cashes a taxpayer’s check which

contains a qualified endorsement.”).

5

Given that the administrator herself considered the October 2002 check to be given in

“partial satisfaction” of the estate’s federal tax liabilities and so notified the plaintiff when the

check was tendered, it is unclear how the plaintiff’s acceptance of the check could work a

modification or an accord and satisfaction even if federal law preserved a field of operation for

those doctrines.

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for purposes of deciding the motion for summary judgment the agreement remained in effect as

of October 2002.3

 The issue becomes whether the estate satisfied the agreement at that time. 

As noted, the payment the plaintiff received in October 2002 was approximately $15,000

below the amount specified by the settlement agreement. The defendants argue that the

plaintiff’s acceptance of the estate’s check worked either a modification of the settlement

agreement as to the amount to be paid or an accord and satisfaction. (Doc. 32 at 3). However,

“[t]he settlement of disputed tax liabilities is governed by 26 U.S.C. §§ 7121 and 7122 .... The

requirements set forth in these statutes and the accompanying regulations are exclusive and

strictly construed.” Klein v. Commissioner, 899 F.2d 1149, 1152 (11th Cir. 1990). Thus, there

can be no accord and satisfaction of a tax dispute absent full compliance with the statutory and

regulatory requirements. Bokum v. Commissioner, 992 F.2d 1136, 1142 n.8 (11th Cir. 1993). In

particular, “[b]ecause of this exclusive method [imposed by Sections 7121 and 7122], no theory

founded upon general concepts of accord and satisfaction can be used to impute a compromise

settlement, [citation omitted], and therefore none resulted from the government’s acceptance and

cashing of appellant’s check.” Bowling v. United States, 510 F.2d 112, 113 (5th Cir. 1975).4 For

the same reason, the plaintiff’s acceptance of the estate’s check could not work a modification of

the 1999 settlement agreement.5 

B. The Defendants’ Liability.

A claim of the United States Government shall be paid first when ... 

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“There is no question that taxes owed to the United States fall within the scope of a

‘claim of the Government’ under the statute’s broad terms.” United States v. Coppola, 85 F.3d

1515, 1520 (2nd Cir. 1996).

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the estate of a deceased debtor, in the custody of the executor or administrator, 

is not enough to pay all debts of the debtor.

...

A representative of a person or an estate ... paying any part of a debt 

of the person or estate before paying a claim of the Government is liable to 

the extent of the payment for unpaid claims of the Government.

31 U.S.C. § 3713(a)(1)(B), (b). The defendants do not dispute that this provision applies to them

and their conduct in this case.6

 Nor do they deny that they had “notice of facts that would lead a

reasonably prudent person to inquire as to the existence of the debt owed [the plaintiff] before

making the challenged distribution or payment.” United States v. Coppola, 85 F.3d 1015, 1020

(2nd Cir. 1996). Their only articulated defense is that no one told them that they could be held

personally liable should they pay others before paying the plaintiff. Given the explicit warning

in the plaintiff’s proof of claim, this assertion is factually dubious. It is in any event legally

untenable, as “[a]ll citizens are presumptively charged with knowledge of the law ....” Atkins v.

Parker, 472 U.S. 115, 130 (1985). Although “[a]rguably that presumption may be overcome in

cases in which the statute does not allow a sufficient ‘grace period’ to provide the persons

affected by a change in the law with an adequate opportunity to become familiar with their

obligations under it,” id., Section 3713 has been on the books unchanged since 1982.

C. Amount of the Defendants’ Liability.

The defendants are liable “to the extent of the payment [from the estate] for unpaid

claims of the [plaintiff].” 31 U.S.C. § 3713(b).

Courts have also taken an expansive view of the type of payments or 

‘distributions’ from the estate for which an executor may be held liable. ... 

Indeed, ... an executor may be held liable under the federal insolvency statute 

for a distribution of funds [from the estate] that is not, strictly speaking, the 

payment of a debt. ... While [the defendant] did not defeat the Government’s 

tax claim against the estate by paying a debt of the estate, he depleted the assets 

of his father’s estate by distributing them to himself and his family, thereby 

preventing payment of the tax debt. Such conduct certainly falls within the 

broad prohibitions of the federal insolvency statute. 

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United States v. Coppola, 85 F.3d at 1020 (internal quotations omitted).

The defendants’ payment of city and state taxes constitutes the payment of the estate’s

debts. E.g., United States v. Cole, 733 F.2d 651, 655 (9th Cir. 1984). Accordingly, the

defendants are liable under Section 3713(b) in the principal amount of $30,000, as requested by

the plaintiff, for making such payments without paying the plaintiff’s claim. (Doc. 24 at 9).

The plaintiff also seeks to impose liability in the additional amount of $31,200, based on

its assertion that the defendants allowed the estate to pay the decedent’s mother $300 a month

from January 1991 through August 1999. (Doc. 24 at 2, 9). Such payments would fall within

Section 3713(b) under Coppola. However, the plaintiff has failed to meet its initial burden of

showing that such payments were made by the estate and in this amount. The defendants’ final

statement in Probate Court states that “[w]e provided for and gave [the decedent’s] mother Mrs.

Reba Irby support while she was alive etc., from 1990 to August of 1999.” (Id., Exhibit H at 1). 

While it may be assumed that this evidence establishes that the estate furnished Ms. Irby some

support, neither it nor the substantively similar testimony of defendant Seymour Irby, III at a

hearing in May 2000, (id., Exhibit G at 9-10), reflects the amount of support provided by the

estate. 

To bridge this awkward gap, the plaintiff submits a letter from Mr. Irby to his aunt dated

September 1991, which states as follows:

I wish to give you three hundred (300.00) each month, to help with the 

care of our grandmother and your mother.

Furthermore, once we pay off all of our father’s bills and debts; we will 

be able to pay more money each month toward mama Reba’s care and saving etc.

(Doc. 24, Exhibit I). On the same page is a photocopy of a check from Mr. Irby to his aunt in

the amount of $300, dated September 1991 and drawn on Mr. Irby’s personal account. (Id.). In

the lower right corner of the page is a handwritten notation of unknown provenance stating,

“4,400 Total in checks.” (Id.).

While Mr. Irby’s letter clearly expresses an intention to pay $300 a month for Ms. Irby, it

does not establish that this intention was in fact carried out, and certainly not for the 104 months

consecutive months the plaintiff claims. Indeed, the language of the letter suggests that the

September 1991 check was the first of its kind, yet the plaintiff seeks to impose liability for $300

a month beginning January 1991. Moreover, the “4,400 ”noted in the corner, while ambiguous,

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Accord Securities & Exchange Commission v. Carrillo, 325 F.3d 1268, 1269 (11th Cir.

2003). 

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may well signify that only that amount was ever provided for Ms. Irby. Finally, the letter is

unclear as to the source of the funds, and the check is drawn on Mr. Irby’s personal account,

with no indication that the funds came from the estate. Whether or not this evidence would

entitle a jury to find that the estate provided $31,200 for Ms. Irby, it does not carry the plaintiff’s

initial burden on motion for summary judgment of showing that a reasonable would have to

make such a finding.

The plaintiff also argues that the Court should award an additional $37,500 under Section

3713(b), representing the rental value of the estate’s realty, on which the defendants allowed

relatives to live rent-free. (Doc. 24 at 9). The plaintiff offers neither authority nor explanation

for its implicit proposition that the failure to maximize the estate’s income can be equated with

the depletion of the estate’s assets for purposes of Section 3713 and Coppola, and the Court is

unwilling to make that dubious leap unaided. 

Finally, the plaintiff argues that it should be awarded prejudgment, based on the simple

fact of liability under Section 3713(b). (Doc. 24 at 9). The plaintiff has cited, and the Court has

located, no case awarding prejudgment interest under Section 3713(b), which certainly suggests

it is an unusual remedy, triggered by more than mere liability. As the sole authority cited by the

plaintiff reflects, the award of prejudgment interest is discretionary with the Court. In re:

International Administrative Services, Inc., 408 F.3d 689, 710 (11th Cir. 2005).7

 In the absence

of cogent explanation why the Court’s discretion should be exercised in favor of making such an

award, the Court exercises its discretion not to do so.

CONCLUSION

For the reasons set forth above, the plaintiff’s motion for summary judgment is granted

to the extent it requests a determination that the defendants are liable to the plaintiff in the

amount of $30,000. In all other respects, the motion is denied. 

 DONE and ORDERED this 21st day of December, 2005.

s/ WILLIAM H. STEELE

UNITED STATES DISTRICT JUDGE

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