274 F.3d 1001 (5th Cir. 2001), 00-21051, Your Ins. Needs Agency v United States

Docket Nº:00-21051
Citation:274 F.3d 1001
Party Name:YOUR INSURANCE NEEDS AGENCY INC., Plaintiff-Appellant, v. UNITED STATES OF AMERICA, Defendant-Appellee. DAVID BRUCE EARL, Plaintiff-Appellant, v. UNITED STATES OF AMERICA, Defendant-Appellee.
Case Date:December 04, 2001
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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274 F.3d 1001 (5th Cir. 2001)




DAVID BRUCE EARL, Plaintiff-Appellant,



No. 00-21051

United States Court of Appeals, Fifth Circuit

December 4, 2001

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Appeal from the United States District Court For the Southern District of Texas

Before REAVLEY, HIGGINBOTHAM, and PARKER, Circuit Judges.


David Bruce Earl and Your Insurance Needs Agency, Inc. appeal from a grant of summary judgment to the Government on their claims for refunds of over $77,000 in tax overpayments in 1991, 1992, 1993, and 1994, inclusive, brought under 26 U.S.C. § 7422(a). We affirm.


In 1991, Earl, the sole officer and shareholder of Your Insurance, hired David Shand, a certified public accountant, to prepare and file Your Insurance's and his own federal tax returns. Pursuant to Earl's instructions and authorization, Shand prepared and submitted individual income tax returns for Earl for tax years 1991, 1992, and 1993, and payroll tax returns for Your Insurance for six quarters in 1992, 1993, and 1994.

Unbeknownst to Earl, when preparing the taxpayers' returns for each tax year in question, Shand overstated the taxpayers' tax liability on their returns and then either had Earl sign the returns or signed the returns himself with Earl's permission. Shand then produced copies of the returns for Earl, who paid the overstated tax liability as represented to him by Shand. Finally, Shand altered the signed returns to reflect a lesser, correct tax liability and inserted Shand's own office address as the address on the returns. The Internal Revenue Service authorized the Department of the Treasury to issue checks to Earl and Your Insurance for the refunds claimed, and the Treasury then issued and mailed these checks to the address--Shand's--on the returns. Shand received the checks, forged Earl's signature, and negotiated the refund checks, keeping the proceeds himself. According to IRS records, the last refund check to Earl was issued in late May 1994, and the last refund check to Your Insurance was issued in late November 1994.

The IRS eventually discovered this scheme, which Shand perpetrated on many of his clients, but prosecuted and convicted Shand in 1996 for another, unrelated tax fraud scheme. Earl first learned of Shand's conduct and the existence of the refund checks in late 1994, when he was informed of Shand's fraud by Mike Harris, an investigator with the Criminal Investigation Division of the IRS.

Two years later, on February 5, 1997, Earl and Your Insurance requested that the IRS issue replacement checks. The IRS refused on November 26, 1997, stating that the IRS sent the refunds, in good faith, to the address shown on the returns and that Earl and Your Insurance should have sought replacement checks from the Financial Management System, the division within the Department of the Treasury that handles stolen Treasury checks. The IRS further indicated that the Financial Management System would not authorize the IRS to reissue the checks.

On February 25, 1999, Earl and Your Insurance filed separate suits against the United States to recover the tax overpayments. The two cases were ordered consolidated on September 14, 1999, and the parties filed cross-motions for summary judgment. On August 21, 2000, a Magistrate Judge granted summary judgment for the Government in both cases and entered final judgment. The Magistrate Judge denied a Motion to Alter and Amend the Judgment on September 20, 2000. This appeal followed.

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We review a grant of summary judgment de novo, applying the same standard as the district court.1 We may affirm a summary judgment on any ground raised by the movant below and supported by the record, even if it is not the ground relied on by the district court.2 Additionally, "[w]e exercise plenary, de novo review of a district court's assumption of subject matter jurisdiction."3


The Secretary of the Treasury is required, under 26 U.S.C. § 6402(a), to issue refunds to taxpayers for overpayments of tax liabilities. 26 U.S.C. § 6511(a) sets a period of limitations for a taxpayer to file a claim for a refund, requiring that a refund claim "be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid."4

A suit for a refund is allowed by statute, but must be preceded by a claim filed with the Secretary of the Treasury, pursuant to 26 U.S.C. § 7422(a).5 A claim for refund must be filed in accordance with regulations issued by the Secretary of the Treasury.6 A civil action for a refund must be brought against the United States.7 Jurisdiction lies in the district courts in tax suits under 28 U.S.C. § 1340:

The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue, or revenue from imports or tonnage except matters within the jurisdiction of the Court of International Trade.

Jurisdiction also lies in the district courts, concurrent with the United States Court of Federal Claims, for suits against the United States, under 28 U.S.C. § 1346(a)(1):

Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws.

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Other claims against the United States for over $10,000, however, must be brought...

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