Opinion ID: 497965
Heading Depth: 2
Heading Rank: 2

Heading: The purported settlement of Antone's tax liabilities

Text: 49 The district court properly held that the compromise settlement cannot be enforced against the government despite the superficially apparent acceptance of Frank's offer. Sections 7121 and 7122 of the tax code govern settlement of disputed tax liabilities, and authorize the Secretary of the Treasury or his delegate to enter into written agreements to settle disputes over tax liability and to compromise any civil or criminal case arising under the internal revenue laws. 26 U.S.C.A. Sec. 7121, 7122 (1967 & Supp.1987). Section 7122 is the exclusive method by which tax cases may be compromised. Botany Worsted Mills v. United States, 278 U.S. 282, 288-89, 49 S.Ct. 129, 131-32, 73 L.Ed. 379 (1929) (prior version of statute); Shumaker v. Commissioner of Internal Revenue, 648 F.2d 1198, 1199-1200 (9th Cir.1981); Country Gas Service, Inc. v. United States, 405 F.2d 147, 149 (1st Cir.1969); United States v. Hardy, 299 F.2d 600, 605-06 (4th Cir.1962); Brast v. Winding Gulf Colliery Co., 94 F.2d 179, 181 (4th Cir.1938). See Holland v. Commissioner of Internal Revenue, 622 F.2d 95, 97 (4th Cir.1980) (no binding agreement where form setting forth tax deficiency not approved by District Director). 50 The requirements of those statutes and accompanying regulations are strictly construed. Botany Worsted Mills, 278 U.S. at 288-89, 49 S.Ct. at 131-32, cited with approval in Yarborough v. United States, 230 F.2d 56, 62 (4th Cir.1956). The letter of acceptance given to Frank was signed by the Pittsburgh IRS District Director (actually, stamped with his signature), but the authority to settle disputes involving unpaid liability over $100,000 is granted only to IRS Regional Commissioners and Regional Counsel. Delegation Order 11 (Rev. 13), 1982-1 Cum.Bull. 333. Thus, even if the District Director had signed the letter and intended to accept Frank's offer of compromise, the acceptance would have been ineffective. See, e.g., Botany Worsted Mills v. United States, 278 U.S. 282, 49 S.Ct. 129, 73 L.Ed. 379 (1928) (attempted informal settlement by subordinate officials did not constitute binding agreement); Dorl v. Commissioner of Internal Revenue, 507 F.2d 406, 407 (2d Cir.1974) (letter of assurance from revenue officer not authorized to compromise under Sec. 7121 does not bind United States); Reimer v. United States, 441 F.2d 1129, 1130 (5th Cir.1971) (per curiam) (United States not bound by apparent settlement where agent without authority to compromise taxpayer's tax liability and form stated that IRS not waiving right to further assessment); Country Gas Service v. United States, 405 F.2d 147, 149-50 (1st Cir.1969) (because exclusive means of compromise established by Sec. 7122 not used, any arrangement taxpayer made with agent had no legal standing); McGee v. United States, 566 F.Supp. 960 (M.D.Fla.1982) (government not bound by agreement allowing installment payments where agreement not signed by qualified delegate under Sec. 7122). 51 Those cases and others have held that the exclusivity of Sec. 7122 bars enforcement of apparent agreements under general concepts of accord and satisfaction. See, e.g., Bowling v. United States, 510 F.2d 112, 113 (5th Cir.1975); Moskowitz v. United States, 285 F.2d 451, 453, 152 Ct.Cl. 412 (1961). Therefore, despite Brooks' arguments to the contrary, the fact that the government kept and applied to claims against Brimar and Anthony Frank the $250,000 tendered with the compromise offer does not create an enforceable settlement. 52 Even if the purported acceptance letter had been signed by an authorized official, the settlement could have been set aside by the government because of Anthony Frank's attempt to bribe the IRS agent. It is well established that an agreement with the government obtained by fraud cannot be enforced against the government. Pan American Petroleum & Transport Co. v. United States, 273 U.S. 456, 500, 47 S.Ct. 416, 422, 71 L.Ed. 734 (1927); Crocker v. United States, 240 U.S. 74, 80-81, 36 S.Ct. 245, 247-48, 60 L.Ed. 533 (1916). Brooks urges that Anthony Frank's acquittal on the bribery charge bars the application of the principle to the settlement in question; but it is also well established that because of the different burdens of proof involved, acquittal of a criminal charge is not res judicata in a civil case. United States v. National Association of Real Estate Boards, 339 U.S. 485, 492-94, 70 S.Ct. 711, 715-17, 94 L.Ed. 1007 (1950) (Sherman Act); Helvering v. Mitchell, 303 U.S. 391, 397, 58 S.Ct. 630, 632, 82 L.Ed. 917 (1938) (income tax). Here, nothing in the record or the briefs indicates that the district court's finding of fraud was clearly erroneous. 53 We also agree with the district court that Brooks lacks standing to attempt to estop the Government from asserting its tax lien against Antone. It is true that the tax code requires that [u]pon the rejection of any such offer [made under Sec. 7122], the Secretary or his delegate shall refund to the maker of such offer the amount thereof. 26 U.S.C.A. Sec. 7809 (1967 & Supp.1987). But Brooks' reliance on the provision is unavailing, because Brooks was not the maker of the offer. See Ralston Steel Corp. v. United States, 340 F.2d 663, 669-72, 169 Ct.Cl. 119 (1965), cert. denied, 381 U.S. 950, 85 S.Ct. 1803, 14 L.Ed.2d 723 (1965). Brooks has no standing to challenge transactions to which he is a stranger. The tax code gives Brooks standing to bring a civil action challenging the government's levy on property in which Brooks has a competing property interest, 26 U.S.C.A. Sec. 7426(a)(1) (1967 & Supp.1987); but Brooks may not challenge the underlying tax assessment, which is conclusively presumed to be valid. Id. Sec. 7426(c). Once the compromise transaction was voided by Anthony Frank's actions, the IRS was entitled to treat the $250,000 as any other assets of the delinquent taxpayers in government possession. In the present case, the government found only $50,000 of the fund actually belonged to one of the taxpayers at issue (Brimar), and turned the remainder over to the Gibson Companies. 54 Similarly, Brooks cannot estop the government from denying the existence of a settlement. As noted above, the exclusivity of Sec. 7122 prevents the application of general contract rules to enforce apparent agreements between the IRS and taxpayers. Anthony Frank's fraudulent actions in connection with making the offer of compromise would probably estop him or his estate from making a claim for refund, in any event. See Coy v. United States, 377 F.2d 925, 928 (9th Cir.1967) (compromise money, which was filched from government by taxpayer through misrepresentation of sale price of property subject to tax lien, could be kept by IRS despite rejection of offer). If Brooks were standing in the shoes of Anthony Frank, he could not estop the government because Anthony Frank's attempted fraud vitiated the whole transaction. And Brooks cannot attempt to estop the government on his own behalf, because he did not detrimentally rely on the government's apparent acceptance of Anthony Frank's offer. The loans and security interest under which Brooks claims were transacted in 1978 and 1979; the settlement-related activities occurred in 1983. The order of the district court is 55 AFFIRMED.