Cy Girard, Sam R. Girard, Herbert A. Girard, As Executors of The Estate of Frank Goldberg, Deceased v. Edwin Gill, Formerly Collector of Internal Revenue, 261 F.2d 695, 4th Cir. (1958)
Cy Girard, Sam R. Girard, Herbert A. Girard, As Executors of The Estate of Frank Goldberg, Deceased v. Edwin Gill, Formerly Collector of Internal Revenue, 261 F.2d 695, 4th Cir. (1958)
Cy Girard, Sam R. Girard, Herbert A. Girard, As Executors of The Estate of Frank Goldberg, Deceased v. Edwin Gill, Formerly Collector of Internal Revenue, 261 F.2d 695, 4th Cir. (1958)
2d 695
Maurice N. Maloof, Atlanta, Ga. (Morris B. Abram, Atlanta, Ga., on brief), for
appellants.
This is an appeal from a summary judgment for the defendant, former Collector
of Internal Revenue (appellee), on an action by the plaintiffs, executors of the
estate of Frank Goldberg (taxpayer) for the refund of Federal income taxes,
interest and penalties in the amount of $313,015.88 for the period from January
1 to November 20, 1945, and for the year 1946. In 1949, appellee proposed
additional assessments of net income for this period of slightly over $400,000.
Almost the entire proposed additions related to the rental of mill properties
(approximately $130,000) and alleged partnership profits (approximately
$270,000), the latter on the theory that taxpayer in fact owned a 75 per cent
interest in the partnership but had reported income on the basis of a 26 per cent
interest. Protests, with respect to the proposed assessments, proposed
assessments against the taxpayer for other years and against others associated
with taxpayer by blood, marriage and business relationships ("related"
A claim for refund on behalf of taxpayer was filed on June 23, 1954, after
limitations had run upon the assessment and collection of further tax
deficiencies against taxpayer and related taxpayers. This suit was filed March 8,
1955, at which time the Commissioner had not acted on the claim for refund.
Appellee filed an affirmative defense, the first paragraph of which alleged that
"concessions were made by the Internal Revenue Service in return for which
plaintiffs submitted proposals on Treasury Department Forms 870-TS" which
were accepted, and claims for refund were filed after the expiration of
limitations for the assessment and collection of further tax deficiencies.
Paragraph 2 of the affirmative defense alleged that in permitting the statute of
limitations to expire without the assessment and collection of further
deficiencies, the Commissioner relied upon2 the statements in Form 870-TS
[that no claims for refund would be made]; "that binding agreements were
effected when the same were accepted"; and that by "virtue of the foregoing,
plaintiffs are precluded from prosecuting this action." The second paragraph
was later amended to allege that the Commissioner "relied upon the statements
* * * to his detriment"; reference to the effecting of "binding agreements" by
acceptance was omitted; it was alleged that plaintiffs "violated their
representation that no claim for refund would be filed or prosecuted; and that
they are estopped from prosecuting this action." Plaintiffs denied the
allegations of paragraph 2 as amended. Defendant thereafter filed a motion for
summary judgment, accompanied by an affidavit of Runkle. An affidavit and
supplemental affidavit of Troy were filed, and a supplemental affidavit by
Runkle.
The court entered summary judgment, finding various facts in accordance with
the Runkle affidavits, and further finding that statements by Troy in his
affidavits did not contradict "the essential facts in this case," except his denial
of a "package settlement," which was contradictory of his letter of December 8,
1949, did "not raise a controversial issue," and "should be disregarded." The
court disposed of Troy's charge of intimidation or bad faith on the part of the
"The plaintiffs are estopped to maintain this action for the recovery of taxes
against the defendant by virtue of the settlement which they obtained from the
defendant under an agreement that the settlement in one case was to be
regarded as final in all of the cases under consideration at that time, and in order
to induce that settlement they promised not to sue. This promise is enforceable
and they are now estopped from maintaining the action. Girard v. Gill
[D.C.N.C.], 142 F. Supp. 770, aff'd, Cir. 4, 243 F.2d 166; Cain v. United States,
254 F.2d ___, [255 F.2d 193] dec'd, Cir. 8, April 29, 1958; Daugette v.
Patterson, Cir. 5, 250 F.2d 753."
10
"These same plaintiffs were parties against the same defendant in the case first
referred to above, and the same issues were involved, and on equitable
principles should be denied the right to maintain this action on the doctrine of
collateral estoppel."
11
12
This court has recently pointed out, in a case in which plaintiff relied upon on
the doctrines of waiver, estoppel and election, that where the resolution of the
legal questions so raised "appears dependent upon the liberality with which the
pleadings are to be construed, and inferences drawn", summary judgment may
be inappropriate. Nichols v. Cities Service Oil Company, 4 Cir., 1958, 256 F.2d
521, 522. Conflicts and ambiguities are not to be resolved on motions for
summary judgment, Coe v. Riley, 5 Cir., 1947, 160 F.2d 538, 540, nor is the
trial court to choose between conflicting inferences, Sarkes Tarzian, Inc. v.
United States, 7 Cir., 1957, 240 F.2d 467, 470. The court should not attempt to
determine questions of credibility, Johnson Farm Equipment Co. v. Cook, 8
Cir., 1956, 230 F.2d 119, 123; and all doubts as to the existence of a genuine
issue as to a material fact should be resolved against the moving party, Sarnoff
v. Ciaglia, 3 Cir., 1947, 165 F.2d 167, 168; Warner v. First National Bank of
Minneapolis, 8 Cir., 1956, 236 F.2d 853, 857, certiorari denied, 1956, 352 U.S.
927, 77 S.Ct. 226, 1 L.Ed.2d 162. Against these principles the granting of
summary judgment in this case must be tested.
Collateral Estoppel.
13
14
15
Equitable Estoppel.
16
17
The appellee did not, either in brief or argument, take the position that the mere
execution and acceptance of a Form 870-TS agreement, constituted a binding
agreement. This effect was claimed in appellee's defense as originally filed, but
in view of the decisions in Botany Worsted Mills v. United States, 1929, 278
U.S. 282, 289, 49 S.Ct. 129, 73 L.Ed. 379; L. Loewy & Son v. Commissioner
of Internal Revenue, 2 Cir., 1929, 31 F.2d 652, 654; Joyce v. Gentsch, 6 Cir.,
1944, 141 F.2d 891, 894-895; Cuba Railroad Company v. United States,
D.C.N.Y.1954, 124 F.Supp. 182, 184-185; Steiden Stores v. Glenn,
D.C.Ky.1950, 94 F.Supp. 712, 720-721; John v. United States, D.C.Wis.1956,
138 F.Supp. 89, 93-94; Knapp-Monarch Company v. Commissioner of Internal
Revenue, 8 Cir., 1944, 139 F.2d 863, 864; Brast v. Winding Gulf Colliery
Company, 4 Cir., 1938, 94 F.2d 179, 181; Edmonds v. United States,
D.C.Wis.1957, 148 F. Supp. 185, 186; Bank of New York v. United States, 3
Cir., 1948, 170 F.2d 20, 23-24; Cabin Creek Consolidated Coal Co. v. United
States, 4 Cir., 1943, 137 F. 2d 948, 952; Hamil v. Fahs, D.C.Fla. 1955, 129
F.Supp. 837, 842; Herber v. Jones, D.C.Okl.1951, 103 F.Supp. 210, 214,
affirmed without discussion of effect of Form 870-TS, 10 Cir., 1952, 198 F.2d
544; Davidson v. United States, D. C.Wis.1944, 58 F.Supp. 481, 483-484;
Arthur V. Davis, 29 T.C. 878 (in which the Tax Court, referring to an accepted
Form 870-TS, stated: "The parties are agreed that the execution of a Form 870TS is not equivalent to the execution of a closing agreement and is not of itself
binding upon the parties"), appellee was well advised to amend his special
defense to allege reliance upon the execution and acceptance of Form 870-TS
to the detriment of the Commissioner.
18
We are of course not here concerned with the ethics of suing for refund after
stating such suit would not be filed, nor may we decide the propriety of
summary judgment upon a forecast of outcome of the litigation. It may be that
upon a trial on the merits it will be found that the Commissioner did rely upon
the undertakings on behalf of the taxpayer to the detriment of the
Commissioner or that in arriving at a determination to file the Form 870-TS in
fact executed, a "settlement" was effected whether or not the party complaining
"surrendered" rights that the law would have sustained, or whether there were
"concessions" (Backus v. United States, 1932, 59 F.2d 242, 259, 75 Ct.Cl. 69,
certiorari denied, 1933, 288 U.S. 610, 53 S.Ct. 402, 77 L.Ed. 984; Guggenheim
v. United States, Ct.Cl. 1948, 77 F.Supp. 186, 111 Ct.Cl. 165, 195-196,
certiorari denied, 1949, 335 U.S. 908, 69 S.Ct. 411, 93 L.Ed. 441, rehearing
denied, 1949, 336 U.S. 911, 69 S.Ct. 513, 93 L.Ed. 1075); or that the United
States cannot, under Sections 1311-1315 of the Internal Revenue Code of 1954,
26 U.S.C.A. 1311-1315 or otherwise, recoup or set-off any claimed
deficiencies. (Compare majority opinions in Cain v. United States, 8 Cir., 1958,
255 F.2d 193, and Daugette v. Patterson, 5 Cir., 1958, 250 F.2d 753, certiorari
denied, 1958, 356 U.S. 902, 78 S.Ct. 561, 2 L.Ed.2d 580, with Arthur V. Davis,
29 T.C. 878).
19
In this case, appellee pleaded that the Commissioner had relied upon conduct
on behalf of the taxpayer to the detriment of the Commissioner, and that the
taxpayer was thereby estopped. These allegations were flatly denied by the
taxpayer. Insofar as the allegations are conclusions of law, they are met by
equally conclusive denials. Insofar as they are allegations of fact, they are
traversed. Whether the Commissioner was entitled to rely upon the allegations
of taxpayer was not dealt with in the case below.3 Whether detriment was or
will be sustained by the Commissioner is far from clear on the record. Runkle's
affidavits purport to show that it was his "understanding and that of the
appellate staff [of the Internal Revenue Service] * * * that the case at bar and
the other cases referred to were all related and considered as a group on a single
proposal for settlement * * *", that there were "concessions on both sides", and
that there was "a so-called `package settlement'". Troy in his affidavits claimed
that the only "concession" by the Government was an admission that it had
been wrong in assessing the mill rentals to taxpayer; that the Government never
"gave up anything to which it was entitled". Troy denied there was any
"package settlement" because "each case was handled on an individual basis in
that any so-called `concessions' made in any of the other cases by the
Government were made on a `give and take' basis with respect to that
individual case only, and in consideration of other concessions made by that
particular taxpayer in that case, for the purpose of settling that case only." He
further stated that he "never submitted any `single proposal for settlement' in
the sense of an interrelated and conditional group settlement. No proposal or
settlement of any taxpayer's liability was related or conditional on the
acceptance of that of any other."
20
Troy also alleged in his affidavits that the Government knew that the mill
rentals were not properly taxable to taxpayer but were "in bad faith, proposed"
to be assessed against him "for the purpose of intimidating and frightening the
taxpayer into making a settlement more favorable than that to which the
Government was entitled * * *" This quite serious charge, which certainly bore
upon the right of the Government to rely upon the Form 870-TS, was not
answered by Runkle in his supplemental affidavit4 . The trial court referred to
this charge, but dismissed it with the comment that it had not been raised in the
protest or complaint. But the necessity for asserting this matter was occasioned
by the amended defense, raising the issue of detrimental reliance by the
Commissioner, and consequent estoppel.
21
We hold on this record that genuine issues of material fact are raised by the
pleadings and affidavits, on which taxpayer is entitled to a jury trial as prayed.
22
Reversed and remanded for further proceedings not inconsistent with this
opinion.
Notes:
1
The claims of the parties as to the nature of the negotiations are briefly
considered below under "Equitable Estoppel."