First Federal Sav. and Loan Ass'n of Durham, In re

• Decision Date: 26 October 1988
• Docket Number: Nos. 87-3656,88-3515,s. 87-3656
• Citation: 860 F.2d 135
• Parties: -5878, 88-2 USTC P 9571 In re FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF DURHAM, Petitioner. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF DURHAM, Plaintiff-Appellant, v. James A. BAKER, III, Secretary of the Treasury, Department of the Treasury, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 135

860 F.2d 135

62 A.F.T.R.2d 88-5878, 88-2 USTC P 9571

In re FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF DURHAM Petitioner FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF DURHAM Plaintiff-Appellant, v. James A. BAKER, III, Secretary of the Treasury, Department of the Treasury, Defendant-Appellee.

Nos. 87-3656, 88-3515.

United States Court of Appeals Fourth Circuit.

Argued April 5, 1988.

Decided Oct. 26, 1988.

Rehearing Denied in No. 88-3515 Dec. 21, 1988.

John Martin Bray, Washington, D.C., for plaintiff-appellant.

Nancy Gerry Morgan, Washington, D.C., for defendant-appellee.

Before WIDENER and SPROUSE, Circuit Judges, and MICHAEL, United States District Judge for the Western District of Virginia, sitting by designation.

SPROUSE, Circuit Judge:

First Federal Savings and Loan Association of Durham (the taxpayer) brought this mandamus action against James A. Baker, III, the Secretary of the Treasury of the United States, to compel him to pay a tax refund which the taxpayer contends was required by a settlement agreement between it and the Department of Justice representing the Internal Revenue Service (IRS). The district court denied the Secretary's motion to dismiss for lack of jurisdiction but, agreeing with him that it had no jurisdiction, ordered the action transferred to the United States Claims Court, and the taxpayer appeals (Case No. 88-3515). The taxpayer also filed a petition for writ of mandamus with the court asking us to direct the district court to assume jurisdiction. We consolidated the appeal and petition for writ of mandamus for our consideration on appeal.

In February 1985, the taxpayer and the IRS finalized a compromise and settlement of the taxpayer's previous tax refund action by filing a stipulation for a dismissal in the district court. That refund suit had consisted of claims for refunds for the years 1967 through 1974, resulting from net operating losses incurred in the years 1975 and 1976, which under applicable law could be carried back to the years 1967 through 1974. The taxpayer also claimed a carry-over of the 1975 and 1976 losses to the years 1977, 1978, and 1979, resulting in a decrease in tax for those three latter years. In the original refund action, one of the IRS' primary concerns was the loss carry-over to the years 1977 through 1979. Its intentions were to contest that portion of the carry-over, but it felt that it might be barred by the applicable statute of limitations. As a result of the settlement, the taxpayer agreed to relinquish the carry-overs for the years 1977 through 1979 and their concomitant advantages. In return, the IRS allowed the taxpayer to claim refunds for the years 1971, 1973, and 1974 (the claims involved in this mandamus action). The negotiations and the resulting agreement were complex, but the tax technicalities upon which the agreements were based luckily have no bearing on the outcome of this appeal. Through a device that the parties concede to be artificial, the agreement placed two tax years into the agreement that were not involved in the refund action they were settling, namely, the tax years 1980 and 1981. It was agreed that the parties would assume that the net operating losses in the years 1980 and 1981 were utilized as carry-backs against the taxable income for the years 1977 through 1979 as if the taxpayer had not claimed on its returns for those years net operating loss carry-overs from 1975 and 1976. The net effect was that the taxpayer conceded that the United States was entitled to interest in the amount of $108,785 for the years 1977 through 1979.

In order to comply with the appropriate section of the Internal Revenue Code, the losses for 1980 and 1981 were required first to be carried back against the taxable income for the years 1971, 1973, and 1974 before carrying the excess to the years 1977 through 1979. As part of the settlement agreement, the IRS prepared and submitted to the taxpayer an "Explanation of Items" which the taxpayer accepted. That document provides:

Pursuant to the settlement agreement, the taxpayer is entitled to a bad debt deduction in the amount of $337,000 and $560,848 for 1975 and 1976 respectively. Under the settlement, taxpayer would have taxable income for 1971, 1973, and 1974. The losses for 1980 and 1981 first would be carried back to eliminate that taxable income; however, to expedite the processing of the refunds, taxpayer has agreed to file claims for refund for 1971, 1973, and 1974. For purposes of computing interest for 1967 through 1973, interest is computed on the overpayments of tax commencing January 31, 1980. The interest on the deficiency, prior to NOL carrybacks, for 1977 runs from the due date of the return to the last day of the loss year (1981). Interest for 1978 and 1979 runs from the due dates of the returns to March 15, 1983, the filing date for 1982. The statute of limitations for assessing deficiencies for 1977, 1978, and 1979 has expired; however, the taxpayer agreed that the refund of tax, interest paid and statutory interest otherwise due under the settlement is reduced by the amount of interest due for 1977, 1978, and 1979, computed under Section 6601(d). The taxpayer has also agreed that it will not claim a deduction in any year subsequent to 1976 for the chargeoff of any of the loans, the charge offs of which in 1975 and 1976 are being conceded not to be deductible.

Part of the settlement agreement, as stated in the stipulation for dismissal filed with the district court, provided:

Plaintiff reserves the right to claim and receive such refunds as may be legally due to it by reason of the carry back of allowable net operating losses from 1980 and subsequent tax years to 1971, 1972, 1973 and 1974, and the stipulation of dismissal to be filed in this action shall be without prejudice to plaintiff's right to claim any refunds for the years to which it may be legally entitled because of such carrybacks.

The settlement agreement provides the technical scenario in which the controversy we now consider developed. Well-represented, sophisticated parties reached the settlement, and it was not the complexity that brought the taxpayer and the IRS again into disagreement. It was rather the simple oversight by both parties of a statute of limitations governing the filing of the claim for refund. The taxpayer, pursuant to the settlement agreement, filed his claim for refund on March 20, 1985 (four weeks after the settlement was finalized by the entry of the stipulation and dismissal of the refund action). The IRS then discovered that the statute of limitations for refund claims generated by the carry-back of the 1980 losses had expired on March 15, 1984, and that the statute governing the carry-back of the 1981 losses had expired on March 15, 1985. The IRS denied the taxpayer's claim for refund on the ground that it was barred by the statute of limitations, and the taxpayer brought this mandamus action pursuant to 28 U.S.C. Sec. 1361.

The district court, in transferring the taxpayer's action to the United States Claims Court, found that it involved only contract issues concerning whether the IRS waived the taxpayer's compliance with the statute of limitations in reaching the settlement and whether in the absence of such a waiver a mutual mistake as to the existence of the taxpayer's refund claim rights should provide a ground for rescission. It opined that, because the Tucker Act ^* provided an adequate forum in which the taxpayer's contract dispute could be resolved, a federal district court had no jurisdiction to entertain this mandamus action. The district court erred in transferring the action.

28 U.S.C. Sec. 1361 provides:

The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.

The propriety of entertaining a petition for writ of mandamus in the federal system is, of course, well defined. It may be invoked only where three elements co-exist: (1) the petitioner has shown a clear right to the relief sought; (2) the respondent has a clear duty to do the particular act requested by the petitioner; and (3) no other adequate remedy is available. Green v. Heckler, 742 F.2d 237, 241 (5th Cir.1984); Jones v. Alexander, 609 F.2d 778, 781 (5th Cir.), cert. denied, 449 U.S. 832, 101 S.Ct. 100, 66 L.Ed.2d 37 (1980). In other words, the petitioner must demonstrate that his right to the issuance of the writ is "clear and indisputable." Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 35, 101 S.Ct. 188, 190, 66 L.Ed.2d 193 (1980); Kerr v. United States District Court, 426 U.S. 394, 403, 96 S.Ct. 2119, 2124, 48 L.Ed.2d 725 (1976); In re Ralston Purina Co., 726 F.2d 1002, 1004 (4th Cir.1984). Mandamus against a public official will not lie unless the alleged duty to act involves a mandatory or ministerial obligation which is so plainly prescribed as to be free of doubt. See Nova Stylings, Inc. v. Ladd, 695 F.2d 1179, 1180 (9th Cir.1983); Save the Dunes Council v. Alexander, 584 F.2d 158, 162 (7th Cir.1978); Short v. Murphy, 512 F.2d 374, 377 (6th Cir.1975). Mandamus is not favored except in extraordinary situations. Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. at 34, 101 S.Ct. at 189; Will v. United States, 389 U.S. 90, 95, 88 S.Ct. 269, 273, 19 L.Ed.2d 305 (1967); Bankers Life & Casualty Co. v. Holland, 346 U.S. 379, 384-85, 74 S.Ct. 145, 148-49, 98 L.Ed. 106 (1953); Ex Parte Fahey, 332 U.S. 258, 259, 67 S.Ct. 1558, 1559, 91 L.Ed. 2041 (1947). In our view, the taxpayer's treatment by the IRS represents the type of extraordinary circumstances on which mandamus relief can be properly based.

The...