                                                                                                                           Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-16-2002

USA v. Stinson
Precedential or Non-Precedential: Non-Precedential

Docket No. 01-3891




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                                                       NOT PRECEDENTIAL
                             UNITED STATES COURT OF APPEALS
                                 FOR THE THIRD CIRCUIT
                                     ________________

                                            No. 01-3891
                                         ________________

                                 UNITED STATES OF AMERICA,
                                          Appellee,

                                                  v.

                         DAVID R. STINSON and JOYCE R. STINSON,
                                        Appellants.
                                    ________________

                             Appeal from the United States District Court
                               for the Western District of Pennsylvania
                                          (C.A. No. 00-491)
                             District Judge: Honorable Robert J. Cindrich
                                         ________________

                                               Argued
                                            June 27, 2002

           Before AMBRO and STAPLETON, Circuit Judges, and O’NEILL, District Judge.*
                                 (Filed: August 16, 2002)
                                   ________________

                                                                     Mark J. Krauland, Esq. (Argued)
                                                                     Mark J. Krauland & Assoc., P.C.
                                                                                    912 Western Ave.
                                                                                Pittsburgh, PA 15233
                                                                               Counsel for Appellants

                                                                      Sara A. Ketchum, Esq. (Argued)
                                                                                        Tax Division
                                                                                Department of Justice



       *
         Honorable Thomas N. O’Neill, Jr., U.S. District Judge for the Eastern District of
Pennsylvania, sitting by designation.
                                                                                        P.O. Box 502
                                                                               Washington, D.C. 20044
                                                                                  Counsel for Appellee
                                         ________________

                                     OPINION OF THE COURT
                                        ________________
O'NEILL, J.:

        Appellants David and Joyce Stinson appeal the District Court’s entry of summary judgment in

favor of the United States in the amount of $152,239.34, reflecting income taxes, penalties and interest

assessed by the Internal Revenue Service against appellants for the years 1985, 1986, 1987, 1988, and

1991.




                                                   I.

        The IRS had assessed liabilities against appellants on March 12, 1990 (for the tax year 1988),

March 19, 1990 (for the tax years 1985, 1986, and 1987) and May 25, 1992 (for the tax year 1991).

These taxes were not paid upon notice and demand, thus giving rise to federal tax liens. On April 6,

1998, appellants entered into a payroll deduction agreement (“PDA”) with the IRS to pay their tax

liability in monthly installments. Under the terms of this agreement $1,132 was to be deducted each

month from the wages of Joyce Stinson. This agreement was signed by Harold and Joyce Stinson and

a representative of Mrs. Stinson’s employer. In the space marked “IRS Originator, title and IDRS

number” the words “Harold Stanton Revenue Officer 2122” are printed. Payments were deducted and

forwarded to the IRS each month from May, 1998 through October, 2000. On March 13, 2000 the

United States filed this action seeking to reduce to judgment the balance remaining on the assessments



                                                   -2-
made against appellants. As of December 31, 2000 the total amount of these assessments left unpaid

was $152,239.34.

        The IRS moved for summary judgment and on July 17, 2001, Magistrate Judge Kenneth

Benson filed a Report and Recommendation in favor of the government. Judge Benson rejected

appellants’ contention that the PDA should act as a bar to the government’s suit because it constituted

an installment agreement under 26 U.S.C. § 6159.1 According to Judge Benson, since no signature

appeared in the box on the PDA marked “Agreement examined or approved by (Signature, title, and

function)” it was never reviewed or approved by any official authorized to bind the IRS, and therefore

there was no evidence that the PDA was in effect at the time this action was filed. Accordingly, Judge

Benson held that the IRS was not barred by 26 U.S.C. § 6331(k)(2) from maintaining this suit.2

Appellants objected to this recommendation on the grounds that (1) proper authority was delegated to

Stanton in compliance with IRS regulations, (2) if Stanton had no such authority then there is a triable

issue as to whether appellants knew or could have known this and whether he represented himself to

the Stinson’s as having such authority, and (3) the principles of equitable estoppel should operate to bar



        1
         This section describes the circumstances under which a taxpayer “is allowed to satisfy liability
for payment of any tax in installment payments . . . .” 26 U.S.C. § 6159(a).
        2
           Section 6331(k)(2) states that “no levy pursuant to § 6331(a) shall be made on the property
or rights to property of any person with respect to any unpaid tax (A) during the period that an offer by
such person for an installment agreement under § 6159 for payment of such unpaid tax is pending with
the Secretary;” and “(C) during the period such an installment agreement for payment of such unpaid
tax is in effect.”
           Section 6331(a) states: “If any person liable to pay any tax neglects or refuses to pay the same
within 10 days of notice and demand it shall be lawful for the Secretary to collect such tax . . . by levy
upon all property and rights to property . . . belonging to such person or on which there is a lien
provided in this chapter for the payment of such tax.”

                                                    -3-
the government from bringing this action.

        On September 18, 2001, District Court Judge Robert Cindrich granted the government’s

motion for summary judgement; however, he did not adopt the reasoning of the Magistrate Judge,

finding instead that the PDA appeared “to fit within the language of Section 6159.” Judge Cindrich held

further that even if the PDA constituted a valid installment agreement, appellants’ argument must fail

because § 6331(k)(2) was not in effect when the PDA began to operate in May, 1998 and therefore

could not be relied on by appellants to bar the current action. Since at the time the PDA was signed

installment agreements were not yet covered by § 6331(k), Judge Cindrich held there could have been

no detrimental reliance on any alleged misrepresentation by the government that the PDA was such an

agreement; therefore, appellants’ estoppel argument also failed.

        On appeal the Stinsons continue to assert that the PDA constitutes an installment agreement

under § 6159(a). Appellants contend that it was not they but Magistrate Judge Benson who first

attempted to apply § 6331(k), and argue that the existence of a valid § 6159 agreement bars the type

of action brought against them by the government irrespective of the applicability of § 6331(k). Should

we find that the PDA is not a valid installment agreement under § 6159, appellants argue that the

doctrine of equitable estoppel should bar the action against them.




                                                     II.

        On appeal from an order entering summary judgment, this Court undertakes de novo review,

applying the same standard the District Court should apply. Summary judgment is appropriate when

“there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a


                                                     -4-
matter of law.” Fed. R. Civ. P. 56(c).

        Appellants contend that the District Court’s ruling that § 6331(k)(2) does not bar the

government’s suit is not relevant to their appeal. We agree. Section 6331(k)(2) bars the Secretary of

the Treasury from levying upon the property or rights to property of any person with respect to any

unpaid tax during the period that an offer for an installment agreement under § 6159 is pending and

during the period such an installment agreement is in effect. Appellants do not contend that the IRS

imposed an unlawful levy on their property. Rather, appellants argue that since § 6159 states that the

Secretary is authorized to enter into agreements under which the “taxpayer is allowed to satisfy liability

for payment of any tax in installment payments. . . ”, their compliance with the PDA satisfied their

outstanding tax liability.

        The IRS “limits the length of installment agreements to the 10-year statutory collection period 3

except in instances when a reasonable extension of the statutory period for collection will allow an

agreement to be accepted. In these cases, waivers of the CSED [(Collection Statute Expiration Date)]

should be secured.” Int. Rev. Man. 5.14.2.1(2). Appellants point out that “[i]n an area of the [PDA]

listed as ‘IRS Use Only’, there is a circle around an indicator for the statement ‘No future action is

required,’ and an entry listing the CSED as 3/19/00.” (App. Br. at 11). According to appellants, since

the PDA does not include a condition extending the period of limitations and appellants have never

waived the statutory expiration date, the agreement by its terms expired on March 19, 2000. We note

that the PDA does not list the CSED as “3/19/00” but lists the earliest CSED as “3/19/00” (emphasis



        3
         Under 26 U.S.C. § 6501(a) the government may bring suit against a taxpayer “only if the . . .
proceeding [is] begun within ten years after the assessment of the tax.”

                                                    -5-
added), and that payments continued to be deducted and forwarded to the government through

October, 2000. There is nothing on the face of the PDA that suggests that it was the intention of either

party that the PDA have a definite termination date of March 19, 2000. But there is also nothing

contained in the PDA indicating that the IRS was willing to take less than the full amount owed by

appellants.

        At oral argument counsel for appellants admitted that as the ten year statute of limitations

approached on the earliest assessment, March 12, 1990, the IRS asked appellants to agree to a

voluntary extension of the statute of limitations that would allow the terms of the PDA to remain in

place. Appellants refused. This left the IRS with the choice of either allowing appellants to avoid their

outstanding tax liability or bringing suit prior to March 13, 2000.4 28 U.S.C. §§ 7403(a) states in

relevant part:

        In any case where there has been a refusal or neglect to pay any tax, or to discharge any
        liability in respect thereof, whether or not levy has been made, the Attorney General or his
        delegate, at the request of the Secretary, may direct a civil action to be filed in a district court of
        the United States to enforce the lien of the United States under this title with respect to such tax
        or liability . . . .

Appellants’ refusal to extend the statutory period is the functional equivalent of a refusal to pay their tax

obligation, thereby rendering an action to reduce this obligation to judgment appropriate. This is true

whether the PDA is construed to be a § 6159 installment agreement or not.5 Treasury Regulation §


        4
            March 12, 2000, fell on a Sunday. The government filed this suit on March 13, 2000, the
first day following that was not a Saturday, Sunday or legal holiday. See Fed. R. Civ. P. 6(a).
        5
          Even if the PDA does constitute a § 6159 installment agreement, appellants have not been
able to identify any reason why such a circumstance would bar the government from bringing an action
to reduce their outstanding tax liability to judgment. See 26 U.S.C. §§ 7401-03 (authorizing the IRS to
reduce an unpaid tax assessment to judgment and to foreclose federal tax liens which arise from such an

                                                     -6-
301.6159-1(d) states:

        Except as otherwise provided by the installment agreement, during the terms of the agreement
        the director may take actions to protect the interests of the government with regard to the
        unpaid balance of the tax liability to which the installment agreement applies . . . , including any
        actions enumerated in the agreement.

26 C.F.R. § 301.6159-1. Appellants argue that the government’s suit against them is not authorized by

this regulation because it does not fit among any of the examples of permissible action that are listed

immediately following the regulation.6 We disagree. The four scenarios listed are merely examples of

such action and do not provide an exhaustive list of the only actions that may ever be taken by the IRS

to protect the interests of the government. If during the pendency of an installment agreement the

limitations period on the assessed liability of the taxpayer is about to expire, the government may

protect the interests of the United States by reducing the taxpayer’s obligation to judgment.

        Since in our view the government properly brought this action against appellants whether the

PDA constitutes a valid installment agreement under § 6159 or not, there could have been no

detrimental reliance on any alleged misrepresentation by the government that the PDA was an



assessment in federal court).
        6
            The regulation states: “The actions include, for example:

                  1.      Requesting updated financial information from any party to the agreement;
                  2.      Conducting further investigations (including the issuance and enforcement of
                          summonses) in connection with the tax liability to which the installment
                          agreement applies.
                  3.      Filing or refiling notices of federal tax lien; and
                  4.      Taking collection action against any person who is not a party to the agreement
                          but who is liable for the tax to which the agreement applies.”

26 C.F.R. § 301.6159.1(d)(1-4).

                                                     -7-
installment agreement. Therefore we need not address appellants’ argument the government should be

equitably estopped from bringing suit against them.




                                                   III.

        For the foregoing reasons, we will affirm the Order of the District Court granting the

government’s motion for summary judgment.




_______________________________________________

TO THE CLERK:

                                        Please file the foregoing opinion.




                                                                   /s/ Thomas N. O’Neill, Jr.
                                                                        District Judge




                                                   -8-
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