United States of America v. Patrick M. Donovan

*The Honorable Algenon L. Marbley, United States District Judge for
the Southern District of Ohio, sitting by designation.
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0386P (6th Cir.)
File Name: 03a0386p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
v.
PATRICK M. DONOVAN,
Defendant-Appellee.
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No. 02-3260
Appeal from the United States District Court
for the Northern District of Ohio at Akron.
No. 01-01457—James Gwin, District Judge.
Submitted: June 17, 2003
Decided and Filed: October 31, 2003
Before: BOGGS, Chief Circuit Judge; GILMAN, Circuit
Judge; and MARBLEY, District Judge.*
_________________
COUNSEL
ON BRIEF: Robert J. Branman, David English Carmack,
UNITED STATES DEPARTMENT OF JUSTICE, TAX
2 United States v. Donovan No. 02-3260
DIVISION, APPELLATE SECTION, Washington, D.C., for
Appellant. Irving Bell, Cleveland, Ohio, for Appellee.
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OPINION
_________________
BOGGS, Chief Circuit Judge. The United States appeals
the order of summary judgment entered by the district court,
dismissing its complaint against Patrick Donovan, in which
it sought to reduce to judgment certain tax assessments. For
the following reasons, we reverse and remand to the district
court so that it may enter summary judgment in favor of the
government.
I
Donovan was a responsible officer at J.A. Clark
Mechanical, Inc. (“Clark”) during 1985 and 1986. Clark
failed to pay certain employment tax liabilities that were
withheld from employees’ wages. The IRS determined that
Donovan was a person responsible for Clark’s failure to pay
the withheld taxes, and that he willfully allowed other
creditors to be paid ahead of the government. The IRS made
an assessment against Donovan “for unpaid tax liabilities for
trust fund related penalties,” pursuant to I.R.C. § 6672. The
assessment was made on March 16, 1989 in the amount of
$154,570.13.
The government had ten years after assessment to bring suit
to collect the tax liability, unless an exception to the ten-year
statute of limitations existed. I.R.C. § 6502(a)(1). The statute
of limitations could be extended by an agreement in writing
by the IRS and Donovan before the expiration of the ten-year
limit. I.R.C. § 6502(a)(2). Several months prior to March 16,
1999, the date the statute of limitations would expire,
Donovan made the IRS an offer in compromise on IRS Form

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No. 02-3260 United States v. Donovan 3
656. Form 656 contains an explicit agreement by which the
statute of limitations is extended.
On April 18, 2000, Donovan sent the IRS a withdrawal of
his offer in compromise. The IRS sent a return letter, dated
April 28, 2000, acknowledging the withdrawal of the offer,
stating that “[y]our offer is considered withdrawn as of
04/18/00.”
On June 13, 2001, the government filed this suit. The total
amount due as of May 18, 2001 was $466,936.21. Donovan
filed a motion for summary judgment, arguing that the suit
was barred by the statute of limitations. The district court
entered summary judgment in favor of Donovan.
The dispute centers on when the statute of limitations began
to run again: (1) on April 18, 2000, the date Donovan faxed
his letter withdrawing the offer, and the date the return letter
indicated that his offer was considered withdrawn; or
(2) April 28, 2000, the date the IRS acknowledged the
withdrawal in writing. Donovan argues that the period the
offer was pending ended on April 18, which would cause the
statute of limitations to expire on June 4, 2001. The
government argues that the period the offer was pending
expired on April 28, 2000, and that the statute of limitations
ended on June 14, 2001.
The district court stated in its opinion that Form 656 was a
contract, and thus had to be interpreted under contract law. It
found that the terms were clear and unambiguous, and that
there were no issues of fact to be determined. The court went
on to state that the contract’s interpretation required the court
to discern the parties’ intent. It concluded that the intent of
the parties was to interpret the agreement terms to comport
with the IRS’s standard practice, as the agreement was on an
IRS standard form. The court concluded that IRS’s standard
practice was to consider the withdrawal of a settlement offer
effective as of the date the taxpayer wrote his letter of
withdrawal. Therefore the suit was untimely and summary
4 United States v. Donovan No. 02-3260
judgment in favor of Donovan was proper. The government
timely appealed.
II
Summary judgment is appropriate when the evidence
submitted shows “that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c). The
district court correctly concluded that no genuine issues of
material fact remained, but that the sole question at issue was
a question of law: when the statute of limitations began to
run. This court reviews the grant of summary judgment de
novo, using the same standard as the district court. Cornist v.
B.J.T. Auto Sales, Inc., 272 F.3d 322, 326 (6th Cir. 2001).
The offer in compromise was memorialized on IRS Form
656. Form 656 contains several provisions relevant to this
appeal. Item 8 outlines the conditions to which Donovan
agreed by submitting the offer. Paragraph (e) of that item
reads: “I/we waive and agree to the suspension of any
statutory periods of limitation (time limits provided for by
law) for IRS assessment and collection of the tax liability for
the tax periods identified in item (5).” Paragraph (m) reads:
“The offer is pending starting with the date an authorized IRS
official signs this form and accepts my/our waiver of the
statutory periods of limitation. The offer remains pending
until an authorized IRS official accepts, rejects or
acknowledges withdrawal of the offer in writing.” The
immediately following paragraph, paragraph (n), reads: “The
waiver and suspension of any statutory periods of limitation
for assessment and collection of the amount of the tax liability
described in item (5), continues to apply: while the offer is
pending (see (m) above) . . . and for one additional year
beyond each of the time periods identified in this paragraph.”
The government argues that the offer in compromise was
“pending” until the withdrawal was acknowledged, and the
exact language of the acknowledgment letter does not affect

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No. 02-3260 United States v. Donovan 5
the form waiving the statute of limitations. It cites the
language of paragraph (m), which reads: “The offer remains
pending until an authorized IRS official . . . acknowledges
withdrawal of the offer in writing.” It argues that some
affirmative action by the government, accepting the offer,
rejecting the offer, or acknowledging its withdrawal, is
required in order to set the statue of limitations running again.
The government argues that the form letter sent to Donovan
contains the effective withdrawal date merely to indicate that
the government can no longer accept the offer in compromise,
and that this has nothing to do with when the statute of
limitations begins to run again.
The question of whether the language of an agreement is
ambiguous is a question of law. Parret v. Am. Ship Bldg. Co.,
990 F.2d 854, 858 (6th Cir. 1993). Once the language of a
contract has been held to be ambiguous, the interpretation of
such language is a question of fact that turns on the intent of
the parties. Ibid. A court, however, may not use extrinsic
evidence to create an ambiguity; the ambiguity must be
“apparent on the face of the contract.” Schachner v. Blue
Cross and Blue Shield of Ohio, 77 F.3d 889, 893 (6th Cir.
1996).
The district court first found that the terms of the contract
were clear and unambiguous. Having done so, it was error for
it to go on and attempt to discern the intent of the parties.
The intent of the parties is best determined by the plain
language of the contract. United States v. Hodgekins, 28 F.3d
610, 614 (7th Cir. 1994) (holding that extension of the statute
of limitations on IRS Form 2750 is given effect in accordance
with its plain meaning).
While we recognize that Form 656 could have been more
clearly drafted, and perhaps should be, the key language of
Form 656 – that the “offer remains pending until an
authorized IRS official . . . acknowledges the withdrawal of
the offer in writing” – is unambiguous on its face. The IRS
acknowledgment letter itself does not contradict the plain
6 United States v. Donovan No. 02-3260
terms of Form 656. We find persuasive the government’s
argument that the date of the effective withdrawal of the offer
is a different matter from that of the date when the offer is no
longer “pending” pursuant to paragraph (m). It may indeed
be true, as the district court states, that “the withdrawal of an
offer in compromise is effective as of the date the taxpayer
writes his letter of withdrawal.” That judgment, however,
would be true as a matter of substantive contract law. See
Restatement (Second) of Contracts § 42 (1981). However,
the statute of limitations question turns on when the offer
ceases to be “pending” under paragraph (m) of Form 656.
The latter controls when the statute of limitations begins to
run again.
An objection could be made that the government could
control and manipulate the statute of limitations simply by
failing to acknowledge the withdrawal of an offer. That
argument, which we do not address here, could arise in a
future case if there appeared to be a factual basis for it. Here,
however, the government cannot possibly be charged with
unreasonable delay in sending an acknowledgment of the
withdrawal seven business days after receiving a letter
withdrawing the offer in compromise.
The district court erred in granting summary judgment to
Donovan. The statute of limitations began to run again on
April 28, 2000, the date of the acknowledgment in writing of
the withdrawal of the offer in compromise. The suit is not
untimely.
III
For all of the reasons set forth above, we REVERSE and
REMAND to the district court with instructions to enter
summary judgment in favor of the government.

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