Hurt v. U.S.
| Decision Date | 31 October 1995 |
| Docket Number | 95-1029,Nos. 95-1065,s. 95-1065 |
| Parties | -7815 NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. Charles E. HURT; Carolyn Hurt, Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant, and COMMISSIONER OF THE INTERNAL REVENUE SERVICE, Defendant. Charles E. HURT; Carolyn Hurt, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee, and COMMISSIONER OF THE INTERNAL REVENUE SERVICE, Defendant. . Argued: |
| Court | U.S. Court of Appeals — Fourth Circuit |
ARGUED: Bruce Raleigh Ellisen, Tax Division, United States Department of Justice, Washington, DC, for Appellant. Charles Edward Hurt, Charleston, WV, for Appellees. ON BRIEF: Loretta C. Argrett, Assistant Attorney General, Gary R. Allen, Paula K. Speck, Rebecca Aline Betts, United States Attorney, Tax Division, United States Department of Justice, Washington, DC, for Appellant.
Before HAMILTON, MICHAEL, and MOTZ, Circuit Judges.
This appeal arises out of an income tax dispute for the 1986 tax year between the Appellees/Cross-Appellants, Charles and Carolyn Hurt (the Hurts), and the United States Internal Revenue Service (the IRS or the government). After the parties had entered into a settlement agreement, settling the total amount of the Hurts' liability for the 1986 tax year at $30,761.93, the IRS sought to collect an additional $17,241.19 in statutory interest on the settled amount pursuant to 26 U.S.C.A. (I.R.C.) Sec. 6601(a) (West Supp.1995). The Hurts paid the statutory interest under protest and filed a refund suit in the district court. Concluding the settlement agreement contractually precluded the government from collecting the $17,241.19 in statutory interest, the district court granted summary judgment in favor of the Hurts. The government appeals, contending the district court erred in concluding the settlement agreement contractually precluded it from collecting statutory interest. The Hurts cross-appeal the district court's denial of their motion for attorney's fees under I.R.C. Sec. 7430(a) (West 1989). We now affirm the district court in all respects.
On March 2, 1991, the IRS issued the Hurts a notice of income tax deficiency for the 1986 tax year. The notice of deficiency asserted that the Hurts owed: (1) $36,267.44 in additional income tax for 1986; (2) $2,299.55 as a negligence penalty under I.R.C. Sec. 6653(a)(1)(A) (West 1989); (3) $11,286.82 as an understatement penalty under I.R.C. Sec. 6661 (West 1989); and (4) an amount equal to fifty-percent of the interest payable on $45,990.44 as a negligence penalty under I.R.C. Sec. 6653(a)(1)(B) (West 1989). Among the items asserted by the IRS as giving rise to this deficiency were a decrease in the rental loss and an increase in the capital gain attributable to a condominium on Kiawah Island, South Carolina, a gain on the casualty loss of an automobile, and an increase in income subject to self-employment tax.
The Hurts, acting pro se, 1 challenged the petition in the United States Tax Court. Settlement negotiations ensued, resulting in a signed settlement agreement between the parties, entitled "Stipulation of Settled Issues" (the Settlement Agreement). In the Settlement Agreement: (1) the Hurts conceded the rental loss claimed on the Kiawah Island condominium; (2) a value was set for the condominium as well as the property received in exchange, and a deferral of the gain was allowed; (3) a figure was set for the automobile casualty loss; (4) the IRS conceded an adjustment to partnership income; (5) the Hurts conceded the negligence penalty under I.R.C. Sec. 6653(a)(1)(A) (West 1989); (6) fifty-percent of the adjustments to income and to capital gains was to be used for the purpose of calculating the negligence penalty under I.R.C. Sec. 6653(a)(1)(B) (West 1989); and (7) fifty-percent of the adjustments to partnership income and capital gains was to be used to calculate the I.R.C. Sec. 6661 (West 1989) penalty for understatement of income. The Settlement Agreement did not specifically address statutory interest.
The parties then used the stipulated adjustments to determine the amount of the Hurts' income tax deficiency and the amounts of the various penalties. The parties having set forth the amount of the Hurts' income tax deficiency and the amounts of the various penalties in a second signed stipulation agreement, dated June 8, 1992, the Tax Court adopted the agreement as its decision on June 12, 1992 (the Stipulated Decision). The Stipulated Decision provided for (1) an income tax deficiency of $20,217.52; (2) an I.R.C. Sec. 6653(a)(1)(A) (West 1989) negligence penalty of $1,497.03; (3) an I.R.C. Sec. 6661 (West 1989) understatement of income penalty of $3,637.50; and (4) an I.R.C. Sec. 6653(a)(1)(B) (West 1989) negligence penalty "in the amount of 50% of the interest due on $14,970.26." (J.A. 15). Like the Settlement Agreement, the Stipulated Decision did not specifically address statutory interest.
Subsequently, the IRS sought to collect the agreed upon amounts, which totalled $30,761.93, as well as $17,241.19 in statutory interest under I.R.C. Sec. 6601(a) (West Supp.1995), 2 which interest was not specifically mentioned in either the Settlement Agreement or the Stipulated Decision. While the Hurts paid the full amount the IRS sought to collect, they paid the portion constituting statutory interest under protest. Next, the Hurts filed an administrative claim with the IRS for a refund of the $17,241.19, asserting the Settlement Agreement and Stipulated Decision had relieved them of liability for statutory interest. Rejecting this ground, the IRS denied the Hurts' administrative claim on September 24, 1993. The Hurts then instituted this refund suit in federal district court, alleging the government had waived its right to collect statutory interest by entering the Settlement Agreement and Stipulated Decision.
The government moved to dismiss the refund suit pursuant to Federal Rule of Civil Procedure 12(b)(6), alleging the Settlement Agreement and Stipulated Decision did not relieve the Hurts of liability for statutory interest. In support of its allegation, the government attached the declaration of John A. Freeman, the IRS attorney who negotiated the settlement, stating that he and Charles Hurt did not discuss or negotiate the statutory interest due under I.R.C. Sec. 6601(a) (West Supp.1995). The Hurts then moved for summary judgment. Attached to their motion was an affidavit of Charles Hurt directly disputing the IRS attorney's version of the settlement negotiations.
On February 24, 1994, the district court denied the Hurts' motion for summary judgment, and treating the government's Rule 12(b)(6) motion as one for summary judgment, denied it also. The district court then set the case for trial, and the parties submitted a pretrial order. On the trial date, the district court held a hearing, resulting in its granting summary judgment in favor of the Hurts. The Hurts then moved for reimbursement of their attorney's fees under I.R.C. Sec. 7430(a) (West 1989). The district court denied the motion on the ground that pro se litigants may not collect attorney's fees under I.R.C. Sec. 7430(a) (West 1989).
The government appeals the district court's granting of summary judgment in favor of the Hurts, and the Hurts cross-appeal the district court's denial of their motion for attorney's fees.
The principal question we face here is whether the district court erred in concluding the Settlement Agreement and the Stipulated Decision contractually precluded the government from collecting $17,241.19 in statutory interest from the Hurts for the 1986 tax year. We review the district court's grant of summary judgment de novo, applying the same standard that the district court was required to apply for granting the motion. See Thompson Everett, Inc. v. National Cable Advertising, L.P., 57 F.3d 1317, 1323 (4th Cir.1995). To prevail on a motion for summary judgment, the Hurts must demonstrate that: (1) there is no genuine issue as to any material fact; and (2) they are entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a genuine issue of material fact has been raised, we must construe all inferences in favor of the party opposing the motion. See id. 257-58.
At bottom, the parties dispute the legal effect of the Settlement Agreement and Stipulated Decision's silence with respect to the Hurts' liability for statutory interest. The government contends the silence requires us to hold that the parties did not settle the issue of the Hurts' liability for statutory interest. The Hurts contend that given the nature and purpose of a settlement agreement, the silence means the government agreed to waive liability for statutory interest.
In resolving this dispute, we must employ the general principles of contract interpretation, because a settlement agreement is a contract between the settling parties. See United States v. ITT Continental Baking, Co., 420 U.S. 223, 238 (1975); Byrum v. Bear Inv. Co., 936 F.2d 173, 175 (4th Cir.1991). Accordingly, our ultimate duty is to ascertain the meaning and intent of the parties as expressed in the language utilized. See Sand Filtration Corp. v. Cowardin, 213 U.S. 360 (1909). If the meaning of a contract is unambiguous, then the intent of the parties is a question of law solely for the court and should be determined only by looking within the four corners of the document. See Nehi Bottling Co. v. All-American Bottling Corp., 8 F.3d 157, 162 (4th Cir.1993). However, if the contract is ambiguous, then the trier of fact may look beyond the four corners...
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