Engelken v. US, Civ. A. No. 92-F-1955.

• Decision Date: 01 March 1993
• Docket Number: Civ. A. No. 92-F-1955.
• Citation: 823 F. Supp. 845
• Parties: Larry J. ENGELKEN, et al., Plaintiffs, v. The UNITED STATES of America, et al., Defendants.
• Court: U.S. District Court — District of Colorado

823 F. Supp. 845

Larry J. ENGELKEN, et al., Plaintiffs, v. The UNITED STATES of America, et al., Defendants.

Civ. A. No. 92-F-1955.

United States District Court, D. Colorado.

March 1, 1993.

Howard J. Beck and Diana J. Payne, Beck, Cassinis & Hoyt, P.C., Aurora, CO, for plaintiffs.

Michael J. Norton, U.S. Atty., William G. Pharo, Asst. U.S. Atty., Denver, CO and Philip E. Blondin, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, for defendants.

ORDER REGARDING MOTION FOR PARTIAL SUMMARY JUDGMENT

SHERMAN G. FINESILVER, Chief Judge.

This is a case involving an alleged overpayment of taxes. This matter comes before the Court on Defendant's motion for partial summary judgment. Jurisdiction is based on 28 U.S.C.A. § 1331. The litigants have fully briefed the matter. For the reasons stated below, the motion is DENIED.

I.

Plaintiff Larry J. Engelken is a general partner of Plaintiff Engineering Graphics Technology, Ltd. ("EGT").¹ EGT failed to pay Federal Insurance Contributions Act taxes for its employees for the calendar quarters ending September 30, 1982; December 31, 1982; March 31, 1983; June 30, 1983; September 30, 1983; and December 31, 1983. On September 3, 1984, EGT filed payroll tax returns for these periods and requested a prompt assessment by the Internal Revenue Service. The IRS assessed the taxes against EGT and its four general partners, including Engelken, George W. McLure, III, Lawrence E. Benthall, and William C. Detmer.

On September 6, 1984, the partnership and the four general partners submitted an Offer in Compromise (also "the Offer") to the Commissioner of the IRS. At that time, Revenue Officer John Howells accepted on behalf of the IRS the Offer's suspension of the statutory period of limitations applicable to IRS assessments and collections. On November 8, 1984, the IRS recorded two tax liens against EGT, Benthall, Engelken, Detmer, and McLure in Harris County, Texas for the taxes assessed on their return of September 3, 1984. The liens totalled $360,876.04. Engelken claims that in July 1986, in reliance on discussions he had with Bob Chirich in the IRS' office of the Houston Regional Director of Appeals and Art Barganier of the IRS' Special Procedures staff, he sold his house with the intent of applying the proceeds to the Offer in Compromise in satisfaction of his personal liability. Engelken claims he explained to Mr. Chirich that because he had no obligation to sell his home, he felt it would be inappropriate for his portion of the Offer in Compromise not to be credited with the proceeds, thus subjecting him to greater liability than any of his partners.

The IRS agreed to release the lien by granting Engelken's Application for Certificate of Discharge ("the Application") for the tax lien on the property referenced in the lien. On his application, Engelken had stated: "It is the intention of Taxpayer, Larry J. Engelken, to fully apply the proceeds (equity) in the subject property towards my `Offer in Compromise' that is currently in Appeals in the District." Engelken claims by its acceptance of the Application the IRS thus agreed to apply the proceeds of the sale to the Offer in Compromise then pending in appeals before the IRS in Houston, Texas. On August 5, 1986, Engelken paid the proceeds from the sale of his house and other proceeds to the IRS in the amount of $44,294.87.

On March 7, 1989, EGT and its partners claim to have amended the Offer in Compromise, still not accepted by the IRS, with a collateral agreement regarding the partners' joint assessment. The collateral agreement provided that if the Offer in Compromise were accepted, the taxpayers would be released from, and the United States would waive all rights to collect, any amount in excess of the amount referred to in the Offer, or $250,220.18. On August 31, 1989, the IRS accepted the taxpayers' Offer in Compromise. Apparently, no reference was made to the collateral agreement.

On September 30, 1989, InterGraph Corporation ("InterGraph") paid the United States $252,220.18, as part of a contractual obligation with EGT and its partners, in satisfaction of the Offer in Compromise. Engelken subsequently discovered that the proceeds from the sale of his house had not been applied to the Offer in Compromise, and on May 5, 1990, he filed a claim for a refund. The IRS disallowed the claim on October 5, 1990 and again on December 3, 1990. On October 2, 1992, Plaintiffs brought suit in federal court.

II. Summary Judgment Standard

Granting summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Ash Creek Mining Co. v. Lujan, 934 F.2d 240, 242 (10th Cir.1991); Metz v. United States, 933 F.2d 802, 804 (10th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 416, 116 L.Ed.2d 436 (1991); Continental Casualty Co. v. P.D.C., Inc., 931 F.2d 1429, 1430 (10th Cir.1991). A genuine issue of material fact exists only where "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Merrick v. Northern Natural Gas Co., 911 F.2d 426, 429 (10th Cir.1990). Only disputes over facts that might affect the outcome of the case will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Allen v. Dayco Prods., Inc., 758 F.Supp. 630, 631 (D.Colo. 1990).

In reviewing a motion for summary judgment, the court must view the evidence in the light most favorable to the party opposing the motion. Newport Steel Corp. v. Thompson, 757 F.Supp. 1152, 1155 (D.Colo. 1990). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d 891, 892 (10th Cir.1991); Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 889 (10th Cir.1991).

In a motion for summary judgment, the moving party's initial burden is slight. In Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986), the Supreme Court held that the language of rule 56(c) does not require the moving party to show an absence of issues of material fact in order to be awarded summary judgment. Rule 56 does not require the movant to negate the opponent's claim. Id. at 323, 106 S.Ct. at 2553. The moving party must allege an absence of evidence to support the opposing party's case and identify supporting portions of the record. Id.

Once the movant has made an initial showing, the burden of going forward shifts to the opposing party. The nonmovant must establish that there are issues of material fact to be determined. Id. at 322-23, 106 S.Ct. at 2552-53. The nonmovant must go beyond the pleadings and designate specific facts showing genuine issues for trial on every element challenged by the motion. Tillett v. Lujan, 931 F.2d 636, 639 (10th Cir. 1991). Conclusory allegations will not establish issues of fact sufficient to defeat summary judgment. McVay v. Western Plains Serv. Corp., 823 F.2d 1395, 1398 (10th Cir. 1987).

In reviewing the evidence submitted, the court should grant summary judgment only when there is clearly no issue of material fact remaining. In Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2510-11, the Court held that summary judgment should be granted if the pretrial evidence is merely colorable or is not significantly probative. In Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), the Court held that summary judgment is appropriate when the trial judge can conclude that no reasonable trier of fact could find for the nonmovant on the basis of evidence presented in the motion and the response. Id. at 587, 106 S.Ct. at 1356.

III. Standing

We first take up the United States' objection to Engelken's standing. The United States first relies on 26 U.S.C.A. § 6402, which states that "in the case of any overpayment, the Secretary ... may credit the amount of such overpayment ... against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall ... refund any balance to such person." (emphasis added). The United States claims that because InterGraph and not Engelken was the "person who made the overpayment," Engelken lacks standing to bring this action for refund. The United States cites the case of Bruce v. United States, 759 F.2d 755 (9th Cir.1985), in which a taxpayer was held to have no standing to sue for a refund of taxes paid on his behalf by his tax shelter attorney because he had "no financial interest in the litigation." Id. at 759.

The facts in Bruce are substantially dissimilar to those in the case at bar and we do not believe Bruce to be controlling. First, EGT, as well as its general partner, Engelken, do have a financial interest in the litigation. InterGraph satisfied the Offer in Compromise under a contractual obligation either to pay the amount to the IRS or to pay it to EGT. EGT's taxes were therefore paid with the property of EGT. Second, "in the case of a credit, no one technically makes an overpayment yet the credit is refunded to the person entitled to receive it." Bruce, 759 F.2d at 759. In certain circumstances a person other than the actual payer of the tax may have standing to sue for a refund. DeNiro v. United States, 561 F.2d 653, 657 (6th Cir.1977) (finding beneficiaries and executors of estate had standing to sue for refund of taxes overpaid by estate). It is clear that EGT and Engelken's allegations that they twice paid amounts in satisfaction of their deficiency make them potentially entitled to a refund. Where the IRS is alleged to have kept both the amount paid by InterGraph as well as that paid by Engelken, either InterGraph's payment or Engelken's could be considered the overpayment. See id. If Engelken can prove his assertion that he contracted with the IRS to credit certain proceeds toward the amount due in...