In re Crowell, 1:00-CV-70. Bankruptcy No. 96-14256
| Decision Date | 07 February 2001 |
| Docket Number | 98-116.,No. 1:00-CV-70. Bankruptcy No. 96-14256,96-14646. Adversary No. 98-1161,1:00-CV-70. Bankruptcy No. 96-14256 |
| Citation | 258 BR 885 |
| Parties | In re Larry Dean CROWELL and Mary Susan Crowell, Debtors. Larry Dean Crowell and Mary Susan Crowell, Plaintiffs-Appellants, v. United States of America Internal Revenue Service, Defendant-Appellee. In re Duane C. Olcsvary and Patricia C. Oclsvary, Debtors. Duane C. Olcsvary and Patricia C. Olcsvary, Plaintiffs-Appellants, v. United States of America Internal Revenue Service, Defendant-Appellee. |
| Court | U.S. District Court — Eastern District of Tennessee |
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Kyle R. Weems, Chattanooga, TN, for Plaintiffs.
Jason S. Zarin, U.S. Department of Justice, Tax Division, Washington, DC, for Defendant.
This matter is a direct appeal from an order of the United States Bankruptcy Court for the Eastern District of Tennessee on February 1, 2000. Appellants Larry Dean Crowell and Mary Susan Crowell, Duane C. Olcsvary, and Patricia C. Olcsvary ("the Crowells and the Olcsvarys") bring this appeal pursuant to 28 U.S.C. § 158(a) and FED. R. BANKR. P. 8001-8002. After carefully examining the record, the Court concludes that the Bankruptcy Court's decision is correct, and it shall be AFFIRMED. The appeal shall be DISMISSED.
The Bankruptcy Court is the finder of fact. In re Isaacman, 26 F.3d 629, 631 (6th Cir.1994); In re Caldwell, 851 F.2d 852, 857 (6th Cir.1988). This Court must uphold the findings of fact made by the Bankruptcy Court unless those findings are determined to be clearly erroneous. The Bankruptcy Court's conclusions of law are reviewed de novo on appeal. Rembert v. AT&T Universal Card Servs. (In re Rembert), 141 F.3d 277, 280 (6th Cir.1998); In re 255 Park Assocs. Ltd. P'ship, 100 F.3d 1214, 1216 (6th Cir.1996). This Court has the authority to affirm, modify, or reverse the judgment of the Bankruptcy Court, and also may remand the case to the Bankruptcy Court for further proceedings. FED. R. BANKR. P. 8013.
The facts of this case are undisputed. The Crowells and the Olcsvarys were among over five thousand individual investment partners in various cattle-breeding tax shelter partnerships owned and operated by W.J. Hoyt III ("the Hoyt partnerships"). To settle their tax liabilities for the tax years relevant to this appeal, the Crowells and the Olcsvarys entered into written agreements with the appellee, the Internal Revenue Service ("IRS"). These agreements, known as "Form 906 Closing Agreements," purportedly resolved disputes between the IRS and the appellants concerning tax treatment of partnership items.
The sole issue on appeal arises out of the execution of these agreements on behalf of the IRS by Associate Chief of Appeals R.M. Spooner ("Spooner"). At the time Spooner executed the agreements, the Hoyt partnerships had issues docketed before the United States Tax Court. That the Hoyt partnerships had docketed issues at the time bears heavily on this appeal. Among the orders of the Commissioner of Internal Revenue delegating settlement authority to functionaries such as Spooner, Delegation Order 97 ("DO 97") appears to bar an IRS employee in Spooner's position from executing a closing agreement relevant to a case docketed in the Tax Court. Deleg. Order No. 97 (Rev.32), 1995 WL 7688471.
The IRS concedes that if DO 97 is the governing settlement authority for the Crowells and the Olscarys, then the closing agreements are invalid because Spooner lacked the authority to execute them. The IRS argues, and the Bankruptcy Court concluded, that a different order, Delegation Order 209 ("DO 209"), applies under the circumstances of this case, and renders the agreements valid. Deleg. Order No. 209 (Rev.5), 1991-1 C.B. 3122.
26 U.S.C. § 7121 provides the general statutory authorization for the Secretary of the Treasury ("the Secretary") to settle tax liability disputes. Pursuant to this section, entitled "Closing agreements," an agreement approved by the Secretary concerning an individual's tax liability has "final and conclusive" effect, in the absence of fraud or wrongdoing. 26 U.S.C. § 7121(b); In re Spendthrift Farm, Inc., 931 F.2d 405, 407 (6th Cir.1991). The Secretary has delegated the authority to administer and enforce the Internal Revenue Code to the Commissioner of Internal Revenue ("the Commissioner"). Treas. Order 150-10 (April 22, 1982) (Court File No. 4, Ex. 7). Treasury Department regulations specifically authorize the Commissioner to enter into written closing agreements regarding tax liability, and endow these agreements with conclusive effect. 26 C.F.R. § 301.7121-1(a), (c).
Through DO 97, the Commissioner delegates the general responsibility for the execution of closing agreements to IRS officials and employees. DO 97 provides, in relevant part:
The Assistant Commissioner (International); Regional Commissioners; Regional Counsel; Regional Chief Compliance Officers; Service Center Directors; Director, Austin Compliance Center, District Directors; Chiefs and Associate Chiefs of Appeals Offices; and Appeals Team Chiefs with respect to his/her team cases, are hereby authorized in cases under their jurisdiction (but excluding cases docketed before the United States Tax Court) to enter into and approve a written agreement with any person relating to the Internal Revenue tax liability of such person (or of the person or estate for whom he/she acts) for a taxable period or periods ended prior to the date of agreement and related specific items affecting other taxable periods.
DO 97(4) (emphasis added).
The plain language of DO 97 appears to invalidate the agreements between the IRS and the Crowells and the Olcsvarys. At the time Associate Chief of Appeals Spooner executed the closing agreements, the Hoyt partnerships had matters docketed in the Tax Court. According to DO 97, these circumstances prohibit Spooner from entering into a closing agreement. The Bankruptcy Court for the District of Oregon has explicitly held that Spooner lacked authority, under DO 97, to execute a closing agreement under similar circumstances. In re Klee, 216 B.R. 42, 44 (Bkrtcy.D.Or.1997). The absence of such authority, as the Klee court held, voids the agreement. Id. at 44-45. See Botany Worsted Mills v. United States, 278 U.S. 282, 288-89, 49 S.Ct. 129, 73 L.Ed. 379 (1929); Urso v. United States, 72 F.3d 59, 60 (7th Cir.1995); Klein v. Commissioner, 899 F.2d 1149, 1153 (11th Cir.1990); Union Pac. R.R. Co. v. United States, 847 F.2d 1567, 1569-70 (Fed.Cir.1988); Estate of Jones v. Commissioner, 795 F.2d 566, 572-73 (6th Cir.1986). The IRS acknowledges that if DO 97 governs the agreements between it and the appellants, then Spooner lacked authority to execute them and they are invalid.
The IRS argues that the Commissioner has issued a more specific delegation of authority to execute closing agreements, DO 209. According to the IRS, DO 209 displaced DO 97 under the circumstances of this case, and vested proper authority in Spooner to execute the agreements. The pertinent sections of DO 209 provide:
DO 209.
DO 209 differs from DO 97 in three key ways. First, DO 209 concerns a more limited subject matter. As opposed to DO 97's general delegation of authority over closing agreements, DO 209 deals solely with agreements related to partnerships and S-corporations. Second, DO 209 authorizes a wider range of IRS employees to execute agreements concerning these matters. Third, and most importantly for purposes of this appeal, DO 209 does not contain the bar on execution of agreements when there are cases docketed before the Tax Court.
Given these distinctions, if DO 209, rather than DO 97, applied to the agreements with the Crowells and the Olcsvarys, then any question regarding Spooner's authority to execute the agreements evaporates. The fact that the Hoyt partnerships had matters docketed in the Tax Court would be inconsequential. Under DO 209, Spooner possessed the authority to execute the agreements, and the agreements would be valid.3 The Court must, therefore, determine whether DO 209 or DO 97 was the governing delegation of authority.
Administrative orders delegating authority to agency officials and employees do not carry the full weight of statutes. At the same time, delegation orders and statutes share enough characteristics to warrant the Court's employing similar rules of construction. Among the standard methods for construing statutes, courts recognize that "a specific statutory provision governs a general one." Sprague v. General Motors Corp., 133 F.3d 388, 405 (6th Cir.1998). See, e.g., Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 143, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000); Edmond v. United States, 520 U.S. 651, 657, 117 S.Ct. 1573, 137 L.Ed.2d 917 (1997); United States v. Ware, 161 F.3d 414, 423 (6th Cir.1998); Gallenstein v. United...
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